The vertebrate embryonic vasculature develops from angioblasts, which are specified from mesodermal precursors and develop in close association with blood cells. The signals that regulate embryonic vasculogenesis and angiogenesis are incompletely understood. Here, we show that R-spondin 3 (Rspo3), a member of a novel family of secreted proteins in vertebrates that activate Wnt/beta-catenin signaling, plays a key role in these processes. In Xenopus embryos, morpholino antisense knockdown of Rspo3 induces vascular defects because Rspo3 is essential for regulating the balance between angioblast and blood cell specification. In mice, targeted disruption of Rspo3 leads to embryonic lethality caused by vascular defects. Specifically in the placenta, remodeling of the vascular plexus is impaired. In human endothelial cells, R-spondin signaling promotes proliferation and sprouting angiogenesis in vitro, indicating that Rspo3 can regulate endothelial cells directly. We show that vascular endothelial growth factor is an immediate early response gene and a mediator of R-spondin signaling. The results identify Rspo3 as a novel, evolutionarily conserved angiogenic factor in embryogenesis.