A key feature of arteriogenesis is capillary-to-arterial endothelial cell fate transition. Although studies over the past two decades reported that vascular endothelial growth factor A (VEGF-A) - VEGFR2 signaling activates Notch to drive this process, how arteriogenesis is regulated remains poorly understood. Here we report that arterial specification is determined by fluid shear stress (FSS) independent of VEGFR2 signaling and that, in contrast to the current paradigm, VEGFR2 signaling must decline for arteriogenesis to fully take place. VEGF-A does not induce arterial fate in capillary endothelial cells, instead, serving as a critical physiological brake to counteract FSS-driven capillary-to-arterial cell fate transition to maintain the capillary state. The transcription factor Sox17 is the key mediator of the FSS-induced arterial program and a target of VEGF-FSS competition. These findings establish a new paradigm of VEGF-FSS crosstalk coordinating angiogenesis, arteriogenesis and capillary maintenance.