Sprouting angiogenesis is critical to blood vessel formation, but the cellular and molecular controls of this process are poorly understood. We used time-lapse imaging of green fluorescent protein (GFP)-expressing vessels derived from stem cells to analyze dynamic aspects of vascular sprout formation and to determine how the vascular endothelial growth factor (VEGF) receptor flt-1 affects sprouting. Surprisingly, loss of flt-1 led to decreased sprout formation and migration, which resulted in reduced vascular branching. This phenotype was also seen in vivo, as flt-1(-/-) embryos had defective sprouting from the dorsal aorta. We previously showed that loss of flt-1 increases the rate of endothelial cell division. However, the timing of division versus morphogenetic effects suggested that these phenotypes were not causally linked, and in fact mitoses were prevalent in the sprout field of both wild-type and flt-1(-/-) mutant vessels. Rather, rescue of the branching defect by a soluble flt-1 (sflt-1) transgene supports a model whereby flt-1 normally positively regulates sprout formation by production of sflt-1, a soluble form of the receptor that antagonizes VEGF signaling. Thus precise levels of bioactive VEGF-A and perhaps spatial localization of the VEGF signal are likely modulated by flt-1 to ensure proper sprout formation during blood vessel formation.