Despite the progress made thus far in the generation of small-diameter vascular grafts, cell sourcing still remains a problem. Human embryonic stem cells (hESCs) present an exciting new cell source for the regeneration applications due to their high proliferative and differentiation capabilities. In this study, the feasibility of creating small-diameter vascular constructs using smooth muscle cells (SMCs) differentiated from hESC-derived mesenchymal cells was evaluated. In vitro experiments confirmed the ability of these cells to differentiate into smooth muscle actin- and calponin-expressing SMCs in the presence of known inducers, such as transforming growth factor beta. Human vessel walls were constructed by culturing these cells in a bioreactor system under pulsatile conditions for 8 weeks. Histological analysis showed that vessel grafts had similarities to their native counterparts in terms of cellularity and SMC marker expression. However, markers of cartilage and bone tissue were also detected, thus raising questions about stable lineage commitment during differentiation and calling for more stringent analysis of differentiating cell populations.