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Endothelial cells (ECs), pericytes, and vascular smooth muscle cells (vSMCs) are essential for vascular development, and their dysfunction causes multiple cardiovascular diseases. Primary vascular cells for research are, however, difficult to obtain. Human-induced pluripotent stem cells (hiPSCs) derived from somatic tissue are a renewable source of ECs and vSMCs; however, their use as disease models has been limited by low and inconsistent efficiencies of differentiation and the lack of phenotypic bioassays.Here, we developed defined conditions for simultaneous derivation of ECs and pericytes with high efficiency from hiPSCs of different tissue origin. The protocol was equally efficient for all lines and human embryonic stem cells (hESCs). The ECs could undergo sequential passage and were phenotypically indistinguishable, exhibiting features of arterial-like embryonic ECs. Moreover, hiPSC-derived ECs formed an authentic vascular plexus when cocultured with hiPSC-derived pericytes. The coculture system recapitulated (1) major steps of vascular development including EC proliferation and primary plexus remodeling, and (2) EC-mediated maturation and acquisition of contractile vSMC phenotype by pericytes. In addition, hiPSC-derived ECs integrated into developing vasculature as xenografts in zebrafish. This contrasts with more widely used ECs from human umbilical vein, which form only unstable vasculature and were completely unable to integrate into zebrafish blood vessels.We demonstrate that vascular derivatives of hiPSC, such as ECs and pericytes, are fully functional and can be used to study defective endothelia–pericyte interactions in vitro for disease modeling and studies on tumor angiogenesis.