The ability to differentiate human pluripotent stem cells into endothelial cells with properties of cord-blood endothelial colony-forming cells (CB-ECFCs) may enable the derivation of clinically relevant numbers of highly proliferative blood vessel-forming cells to restore endothelial function in patients with vascular disease. We describe a protocol to convert human induced pluripotent stem cells (hiPSCs) or embryonic stem cells (hESCs) into cells similar to CB-ECFCs at an efficiency of >10(8) ECFCs produced from each starting pluripotent stem cell. The CB-ECFC-like cells display a stable endothelial phenotype with high clonal proliferative potential and the capacity to form human vessels in mice and to repair the ischemic mouse retina and limb, and they lack teratoma formation potential. We identify Neuropilin-1 (NRP-1)-mediated activation of KDR signaling through VEGF165 as a critical mechanism for the emergence and maintenance of CB-ECFC-like cells.