Protein S is a vitamin K-dependent glycoprotein, which, besides its anticoagulant function, acts as an agonist for the tyrosine kinase receptors Tyro3, Axl, and Mer. The endothelium expresses Tyro3, Axl, and Mer and produces protein S. The interaction of protein S with endothelial cells and particularly its effects on angiogenesis have not yet been analyzed. Here we show that human protein S, at circulating concentrations, inhibited vascular endothelial growth factor (VEGF) receptor 2-dependent vascularization of Matrigel plugs in vivo and the capacity of endothelial cells to form capillary-like networks in vitro as well as VEGF-A-induced endothelial migration and proliferation. Furthermore, protein S inhibited VEGF-A-induced endothelial VEGFR2 phosphorylation and activation of mitogen-activated kinase-Erk1/2 and Akt. Protein S activated the tyrosine phosphatase SHP2, and the SHP2 inhibitor NSC 87877 reversed the observed inhibition of VEGF-A-induced endothelial proliferation. Using siRNA directed against Tyro3, Axl, and Mer, we demonstrate that protein S-mediated SHP2 activation and inhibition of VEGF-A-stimulated proliferation were mediated by Mer. Our report provides the first evidence for the existence of a protein S/Mer/SHP2 axis, which inhibits VEGFR2 signaling, regulates endothelial function, and points to a role for protein S as an endogenous angiogenesis inhibitor.