Bone morphogenetic protein 4 (BMP4) is crucial for the formation of FLK1-expressing (FLK1(+)) mesodermal cells. To further define the requirement for BMP signaling in the differentiation of blood, endothelial and smooth muscle cells from FLK1(+) mesoderm, we inactivated Alk3 (Bmpr1a) in FLK1(+) cells by crossing Alk3(floxed/floxed) and Flk1(+/Cre)Alk3(+/floxed) mice. Alk3 conditional knockout (CKO) mice died between E10.5 and E11.5. Unexpectedly, Alk3 CKO embryos did not show any hematopoietic defects. However, Alk3 CKO embryos displayed multiple abnormalities in vascular development, including vessel remodeling and maturation, which contributed to severe abdominal hemorrhage. Alk3 CKO embryos also displayed defects in atrioventricular canal (AVC) endocardial cushion formation in the heart. Collectively, our studies indicate a crucial role for ALK3 in vessel remodeling, vessel integrity and endocardial cushion formation during the development of the circulation system.