Blood vessels supply developing organs with metabolic sustenance. Here, we demonstrate a role for blood vessels as a source of developmental signals during pancreatic organogenesis. In vitro experiments with embryonic mouse tissues demonstrate that blood vessel endothelium induces insulin expression in isolated endoderm. Removal of the dorsal aorta in Xenopus laevis embryos results in the failure of insulin expression in vivo. Furthermore, using transgenic mice, we show that ectopic vascularization in the posterior foregut leads to ectopic insulin expression and islet hyperplasia. These results indicate that vessels not only provide metabolic sustenance, but also provide inductive signals for organ development.