The lack of specific markers has raised problems in documenting the precise manner by which the lymphatic system develops. Here we report that the homeobox gene Prox1 is expressed in a subpopulation of endothelial cells that by budding and sprouting give rise to the lymphatic system. The initial localization of these cells in the veins and their subsequent budding are both polarized, suggesting that unidentified guidance signals regulate this process. In Prox1 null mice, budding and sprouting is arrested, although vasculogenesis and angiogenesis of the vascular system is unaffected. These findings suggest that Prox1 is a specific and required regulator of the development of the lymphatic system and that the vascular and lymphatic systems develop independently.