Genetic studies in mice and humans have revealed a pivotal function for transforming growth factor-beta (TGF-β) in vascular development and maintenance of vascular homeostasis. Mice deficient for various TGF-β signaling components develop an embryonic lethality due to vascular defects. In patients, mutations in TGF-β receptors have been linked to vascular dysplasia like Hereditary Hemorrhagic Telangiectasia (HHT) and pulmonary arterial hypertension (PAH). Besides indirect effects by regulating the expression of angiogenic regulators, TGF-β also has potent direct effects on endothelial cell growth and migration, and we have proposed that TGF-β regulates the activation state of the endothelium via two opposing type I receptor/Smad pathways, activin receptor-like kinase (ALK)1 and ALK5. TGF-β is also critical for the differentiation of mural precursors into pericytes and smooth muscle cells. Furthermore, defective paracrine TGF-β signaling between endothelial and neighboring mural cells may be responsible for a leaky vessel phenotype that is characteristic of HHT. In this review, we discuss our current understanding of the TGF-β signaling pathway and its regulation of endothelial and vascular smooth muscle cell function.