Although several molecular players have been described that play a role during the early phases of lung development, it is still unknown how the vasculature develops in relation to the airways. Two opposing models describe development of lung vasculature: one suggests that both vasculogenesis and angiogenesis are involved, whereas the second describes vasculogenesis as the primary mechanism. Therefore, we examined the development of the murine pulmonary vasculature through a morphological analysis from the onset of lung development [9.5 days postcoital (dpc)] until the pseudoglandular stage (13.5 dpc). We analyzed fetal lungs of Tie2-LacZ transgenic mice as well as serial sections of wild-type lungs stained with endothelial-specific antibodies (Flk-1, Fli-1, and PECAM-1). Embryos were processed with intact blood circulation to maintain the integrity of the vasculature; hence individual vessels could be identified with accuracy through serial section analysis. Furthermore, circulating primitive erythrocytes, formed exclusively by the blood islands in the yolk sac, are trapped in vessels during fixation, which proves the connection with the embryonic circulation. We report that from the first morphological sign of lung development, a clear vascular network exists that is in contact with the embryonic circulation. We propose distal angiogenesis as a new concept for early pulmonary vascular morphogenesis. In this model, capillary networks surround the terminal buds and expand by formation of new capillaries from preexisting vessels as the lung bud grows. The fact that at an early embryonic stage a complete vascular network exists may be important for the general understanding of embryonic development.