The brain is critically dependent on the regulation of blood flow to nourish active neurons. One widely held hypothesis of blood flow regulation holds that active neurons stimulate Ca²⁺increases in glial cells, triggering glial release of vasodilating agents. This hypothesis has been challenged, as arteriole dilation can occur in the absence of glial Ca²⁺signaling. We address this controversy by imaging glial Ca²⁺signaling and vessel dilation in the mouse retina. We find that sensory stimulation results in Ca²⁺increases in the glial endfeet contacting capillaries, but not arterioles, and that capillary dilations often follow spontaneous Ca²⁺signaling. In IP3R2^−/−mice, where glial Ca²⁺signaling is reduced, light-evoked capillary, but not arteriole, dilation is abolished. The results show that, independent of arterioles, capillaries actively dilate and regulate blood flow. Furthermore, the results demonstrate that glial Ca²⁺signaling regulates capillary but not arteriole blood flow.SIGNIFICANCE STATEMENTWe show that a Ca²⁺-dependent glial cell signaling mechanism is responsible for regulating capillary but not arteriole diameter. This finding resolves a long-standing controversy regarding the role of glial cells in regulating blood flow, demonstrating that glial Ca²⁺signaling is both necessary and sufficient to dilate capillaries. While the relative contributions of capillaries and arterioles to blood flow regulation remain unclear, elucidating the mechanisms that regulate capillary blood flow may ultimately lead to the development of therapies for treating diseases where blood flow regulation is disrupted, including Alzheimer's disease, stroke, and diabetic retinopathy. This finding may also aid in revealing the underlying neuronal activity that generates BOLD fMRI signals.