Embryonic development of the liver is closely associated with vascular organization. However, little is known about the mechanisms of vascular differentiation during liver development. Our previous study showed that the maturation of sinusoidal endothelial cells (SECs) occurred during embryonic day 13.0 (E13.0) to E15.0. To improve our understanding of SEC differentiation, we examined here the expression of maturation markers, SE-1 and stabilin-2, in fetal livers and also attempted to establish an in vitro SEC differentiation system by culturing E13.5 fetal liver cells. Immunohistochemical examination of SE-1 and stabilin-2 expression during fetal rat liver development revealed that these differentiation markers were co-expressed in SECs in the late stage of liver development, although stabilin-2 was expressed in almost all vascular endothelial cells in the early stage. Liver cells from the E13.5 rat fetus were cultured in EBM-2 medium containing vascular endothelial growth factor (VEGF), transforming growth factor beta1 (TGF-beta1) and VEGF plus SB-431542 (an inhibitor of the TGF-beta1 receptor, activin receptor-like kinase 5 [ALK-5]). In vitro SEC differentiation, as indicated by the appearance of cells co-expressing SE-1 and stabilin-2 and of cells with cytoplasmic fenestrae in endothelial sheets, was induced by the addition of both VEGF and SB-431542, an inhibitor of the phosphorylation of Smad2/3 but not that of Smad1/5/8 in the cultured cells. These results indicate for the first time that both VEGF signaling and the blocking of the ALK-5-Smad2/3 signal pathway are important for the fetal differentiation of SECs.