Formation and homeostasis of the vascular system requires several coordinated cellular functions, but their precise interplay during development and their relative importance for vascular pathologies remain poorly understood. Here, we investigate the endothelial functions regulated by Cdc42 and their in vivo relevance during angiogenic sprouting and vascular morphogenesis in the postnatal mouse retina. We find that Cdc42 is required for endothelial tip cell selection, directed cell migration and filopodia formation, but dispensable for cell proliferation or apoptosis. While the loss of Cdc42 seem generally compatible with apical-basal polarization and lumen formation in retinal blood vessels, it leads to defective endothelial axial polarization and to the formation of severe vascular malformations in capillaries and veins. Tracking of Cdc42 depleted endothelial cells in mosaic retinas suggests that these capillary-venous malformations arise as a consequence of defective cell migration, when endothelial cells that proliferate at normal rates are unable to re-distribute within the vascular network.