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Perlecan is a heparan sulfate proteoglycan assembled into the vascular basement membranes (BMs) during vasculogenesis. In the present study we have investigated vessel formation in mice, teratomas and embryoid bodies (EBs) in the absence of perlecan. We found that perlecan was dispensable for blood vessel formation and maturation until embryonic day (E) 12.5. At later stages of development 40% of mutant embryos showed dilated microvessels in brain and skin, which ruptured and led to severe bleedings. Surprisingly, teratomas derived from perlecan-null ES cells showed efficient contribution of perlecan-deficient endothelial cells to an apparently normal tumor vasculature. However, in perlecan-deficient EBs the area occupied by an endothelial network and the number of vessel branches were significantly diminished. Addition of FGF-2 but not VEGF(165) rescued the in vitro deficiency of the mutant ES cells. Furthermore, in the absence of perlecan in the EB matrix lower levels of FGFs are bound, stored and available for cell surface presentation. Altogether these findings suggest that perlecan supports the maintenance of brain and skin subendothelial BMs and promotes vasculo- and angiogenesis by modulating FGF-2 function.