Abstract Background The molecular mechanisms that govern stem cell differentiation along the endothelial lineage remain largely unknown. Ets related gene (ERG) has recently been shown to participate in the transcriptional regulation of a number of endothelial specific genes including VE-cadherin (CD144), endoglin, and von Willebrand's Factor (vWF). The specific role of the ETS factor ERG during endothelial differentiation has not been evaluated. Results ERG expression and function were evaluated during the differentiation of embryonic stem cells into embryoid bodies (EB). The results of our study demonstrate that ERG is first expressed in a subpopulation of vascular endothelial growth factor receptor 2 (VEGF-R2) expressing cells that also express VE-cadherin. During ES cell differentiation, ERG expression remains restricted to cells of the endothelial lineage that eventually coalesce into primitive vascular structures within embryoid bodies. ERG also exhibits an endothelial cell (EC)-restricted pattern during embryogenesis. To further define the role of ERG during ES cell differentiation, we used a knockdown strategy to inhibit ERG expression. Delivery of three independent shRNA led to 70-85% reductions in ERG expression during ES cell differentiation compared to no change with control shRNA. ERG knockdown was associated with a marked reduction in the number of ECs, the expression of EC-restricted genes, and the formation of vascular structures. Conclusion The ETS factor ERG appears to be a critical regulator of EC differentiation.