Maternal diabetes mellitus is associated with an increased incidence of congenital abnormalities as well as embryonic and perinatal lethality. In particular, a wide range of cardiovascular abnormalities have been noted in children of diabetic mothers and in the offspring of diabetic animals. The vascular system is the first organ system to develop in the embryo and is critical for normal organogenesis. The organization of mesodermal cells into endothelial and hematopoietic cells and into a complex vascular system is, in part, mediated by a series of specific cell-cell, cell-extracellular matrix, and cell-factor interactions. PECAM-1 expression has been observed during the earliest stages of vasculogenesis, and changes in PECAM-1 tyrosine phosphorylation have been associated with endothelial cell migration, vasculogenesis, and angiogenesis both in vitro and in vivo. In this report we demonstrate that exposure to hyperglycemia during gastrulation causes yolk sac and embryonic vasculopathy in cultured murine conceptuses and in the conceptuses of streptozotocin-induced diabetic pregnant mice. In addition, we correlate the presence of yolk sac and embryonic vasculopathy with the failure of PECAM-1 tyrosine dephosphorylation during the formation of blood islands/vessels from clusters of extra-embryonic and embryonic angioblasts in the murine conceptus using both in vitro and in vivo models. The importance of these findings in the development of vasculopathy in the offspring of diabetic mothers and the potential effects and benefits of glucose regulation during the periods of vasculogenesis/angiogenesis in embryonic development are discussed.