The yolk sac of an early mammalian embryo contains progenitors of hematopoietic cells and vascular endothelial cells. We established a cell line, YS4, from murine embryonic yolk sac 10 years ago. The line has been successfully cultured since then. To determine whether these long-term cultured yolk sac cells still have the potential to differentiate into endothelial cells, an in vitro model of yolk sac cell differentiation into tubeforming endothelial cells was established in the present study by culturing the yolk sac cells on basement membrane proteins (Matrigel). The results indicate that upon plating onto Matrigel, YS4 cells attach quickly, align in tandem, and form a complete network of capillary structures within 12 h. By using antibodies against the known components of Matrigel in a tube formation inhibition assay, we found that extracellular matrix proteins such as laminin, collagen IV, vitronectin, and fibronectin are the most important components in the Matrigel which induce the yolk sac cells to undergo endothelial differentiation. New basement membrane proteins are also required for the endothelial differentiation process, as indicated by the fact that base membrane protein synthesis inhibitor, D609, can block the differentiation process. Furthermore, our experiments revealed the involvement of several signal transduction pathways, such as protein kinase A, C and protein tyrosine kinase in this differentiation process.