It has been proposed that hematopoietic and endothelial cells are derived from a common cell, the hemangioblast. In this study, we demonstrate that a subset of CD34⁺ cells have the capacity to differentiate into endothelial cells in vitro in the presence of basic fibroblast growth factor, insulin-like growth factor-1, and vascular endothelial growth factor. These differentiated endothelial cells are CD34⁺, stain for von Willebrand factor (vWF), and incorporate acetylated low-density lipoprotein (LDL). This suggests the possible existence of a bone marrow-derived precursor endothelial cell. To demonstrate this phenomenon in vivo, we used a canine bone marrow transplantation model, in which the marrow cells from the donor and recipient are genetically distinct. Between 6 to 8 months after transplantation, a Dacron graft, made impervious to prevent capillary ingrowth from the surrounding perigraft tissue, was implanted in the descending thoracic aorta. After 12 weeks, the graft was retrieved, and cells with endothelial morphology were identified by silver nitrate staining. Using the di(CA)_n and tetranucleotide (GAAA)_n repeat polymorphisms to distinguish between the donor and recipient DNA, we observed that only donor alleles were detected in DNA from positively stained cells on the impervious Dacron graft. These results strongly suggest that a subset of CD34⁺ cells localized in the bone marrow can be mobilized to the peripheral circulation and can colonize endothelial flow surfaces of vascular prostheses.