Endothelial progenitor cells (EPCs) were recently demonstrated to exist in human cord blood. Phytohaemagglutinin (PHA), a potent mitogen for mononuclear cells was used to induce EPCs from unsorted cord blood mononuclear cells (CBMCs). Adherent cells in clusters appeared approximately 24 h after CBMCs were cultured in plain Roswell Park Memorial Institute media containing 10% fetal bovine serum (culture media) and PHA. Adherent cells were further propagated for 1 week in plain culture media. Flow cytometry and Di-I staining analyses showed that CD45-, CD34+, Flk-1+, CD31+ or VE-cadherin+ EPCs were induced and that they were mainly from the CD34+ cell compartment. When enriched CD34+ cells alone were stimulated with culture supernatant of the PHA-activated CBMCs, they neither proliferated readily nor induced EPCs. Because EPCs first appeared within the clustering cells that expressed high levels of fibronectin and vascular endothelial growth factor (VEGF), our data suggest that both cell-cell/cell-matrix interaction and the local VEGF action are important in the induction of EPCs. Thus, we demonstrate for the first time that EPCs are induced from human cord blood stem cell populations that interact with neighbouring PHA-activated CBMCs. This finding may have a significant implication in inflammatory cell-mediated vasculogenesis and angiogenesis in vivo.