The role of fibroblast growth factors (FGFs) in blood vessel formation has remained unclear. We used differentiating stem-cell cultures (embryoid bodies) and teratomas to show that FGF receptor-1 (FGFR-1) exerts a negative regulatory effect on endothelial cell function in these models. Embryoid bodies lacking expression of FGFR-1 as a result of gene targeting (Fgfr-1(-/-)) displayed increased vascularization and a distinct, elongated vessel morphology. Teratomas derived from FGFR-1-deficient stem cells were characterized by an increased growth rate and abundant, morphologically distinct vessels. Transmission electron microscopy of the Fgfr-1(-/-) teratomas showed a compact and voluminous but functional endothelium, which anastomosed with the host circulation. The increased vascularization and altered endothelial cell morphology was dependent on secreted factor(s), based on the transfer of the Fgfr-1(-/-) vascular phenotype by conditioned medium to Fgfr-1(+/-) embryoid bodies. Antibody and transcript arrays showed down-regulation of interleukin-4 (IL-4) and up-regulation of pleiotrophin in Fgfr-1(-/-) embryoid bodies, compared with the heterozygous cultures. We used neutralizing antibodies to show that IL-4 and pleiotrophin act as negative and positive angiogenic regulators, respectively. We conclude that FGFR-1 negatively regulates endothelial cell function by altering the balance of modulatory cytokines.