Human embryonic stem cells (hESCs) are instrumental in characterizing the molecular mechanisms of human vascular development and disease. Bone morphogenetic proteins (BMPs) play a pivotal role in cardiovascular development in mice, but their importance for vascular cells derived from hESCs has not yet been fully explored. Here, we demonstrate that BMP9 promotes, via its receptor ALK1 and SMAD1/5 activation, sprouting angiogenesis of hESC-derived endothelial cells. We show that the secreted angiogenic factor epidermal growth factor-like domain 7 (EGFL7) is a downstream target of BMP9-SMAD1/5-mediated signaling, and that EGFL7 promotes expansion of endothelium via interference with NOTCH signaling, activation of ERK, and remodeling of the extracellular matrix. CRISPR/Cas9-mediated deletion of EGFL7 highlights the critical role of EGFL7 in BMP9-induced endothelial sprouting and the promotion of angiogenesis. Our study illustrates the complex role of the BMP family in orchestrating hESC vascular development and endothelial sprouting. Display omitted •BMP9/ALK1 signaling induces sprouting of hESC-derived endothelial cells•EGFL7 mediates BMP9-induced sprouting angiogenesis of hESC-derived endothelial cells•EGFL7 inhibits the NOTCH pathway and activates the ERK pathway in HUVECs•EGFL7 affects the extracellular matrix in HUVECs In this article, Valdimarsdottir and colleagues substantiate the importance of BMP9/ALK1 in vascular commitment of hESCs and endothelial sprouting via the secreted extracellular matrix protein EGFL7. They demonstrate the connection of EGFL7 with the NOTCH and ERK pathways and reveal its role in remodeling of the extracellular matrix using CRISPR/Cas9-mediated deletion of EGFL7.