Angiopoietin 2 (Ang2) expression in the retina is increased during physiologic and pathologic neovascularization suggesting that it may be involved. In this study, we used Ang2‐deficient mice to test that hypothesis. Mice deficient in Ang2 showed delayed and incomplete development of the superficial vascular bed of the retina, which develops primarily by vasculogenesis, and complete absence of the intermediate and deep vascular beds which develop by angiogenesis. In addition to incomplete retinal vascular development, Ang2‐deficient mice showed lack of regression of the hyaloid vasculature, resulting in a phenotype that mimics infants with persistent fetal vasculature (PFV), a relatively common congenital abnormality. Exposure to high levels of oxygen resulted in partial regression of the retinal vessels, indicating that oxygen‐induced regression of retinal vessels does not require Ang2. When these oxygen‐exposed mice with few retinal vessels were moved to room air, there was no ischemia‐induced retinal neovascularization. These data support the hypothesis that Ang2 plays a critical role in physiologic and pathologic angiogenesis, and physiologic, but not oxygen‐induced vascular regression. The data also suggest that infants with PFV should be examined for genetic modifications that would be expected to cause perturbations in Tie2 signaling. © 2002 Wiley‐Liss, Inc.