The molecular pathways by which newly formed, immature endothelial cell tubes remodel to form a mature network of vessels supported by perivascular mural cells are not well understood. The zebrafish iguana (igu) genetic mutant has a mutation in the daz-interacting protein 1 (dzip1), a member of the hedgehog signaling pathway. Loss of dzip1 results in decreased size of the cranial dorsal aortae, ultrastructural defects in perivascular mural cell recruitment and subsequent hemorrhage. Although hedgehog signaling is disrupted in igu mutants, we find no defects in vessel patterning or artery-vein specification. Rather, we show that the loss of angiopoietin1 (angpt1) expression in ventral perivascular mesenchyme is responsible for vascular instability in igu mutants. Over-expression of angpt1 or partial down-regulation of the endogenous Angpt1 antagonist angpt2 rescues hemorrhage. This is the first direct in vivo link between hedgehog signaling and the induction of vascular stability by recruitment of perivascular mural cells through angiopoietin signaling.