Vascular endothelial protein tyrosine phosphatase (VE-PTP) is an endothelial-specific receptor-type tyrosine phosphatase that associates with Tie-2 and VE-cadherin. VE-PTP gene disruption leads to embryonic lethality, vascular remodeling defects, and enlargement of vascular structures in extraembryonic tissues. We show here that antibodies against the extracellular part of VE-PTP mimic the effects of VE-PTP gene disruption exemplified by vessel enlargement in allantois explants. These effects require the presence of the angiopoietin receptor Tie-2. Analyzing the mechanism we found that anti–VE-PTP antibodies trigger endocytosis and selectively affect Tie-2–associated, but not VE-cadherin–associated VE-PTP. Dissociation of VE-PTP triggers the activation of Tie-2, leading to enhanced endothelial cell proliferation and enlargement of vascular structures through activation of Erk1/2. Importantly, the antibody effect on vessel enlargement is also observed in newborn mice. We conclude that VE-PTP is required to balance Tie-2 activity and endothelial cell proliferation, thereby controlling blood vessel development and vessel size.