One of the major challenges in tissue engineering of bone substitutes remains vascularization of the transplant. We have developed a three-dimensional collagen-based coculture system to assess interactions between human endothelial cells (hECs) and human osteoblasts (hOBs) in vitro. Human umbilical vein endothelial cells (HUVECs) were grown as three-dimensional multicellular spheroids and seeded in a collagen matrix to assess sprouting of the spheroids, that is, formation of tubelike structures resembling early capillaries. Direct cell contact between hOBs and HUVECs was established by incorporating hOBs into the EC spheroids, thus forming heterogeneous cospheroids. Spatial organization of cospheroids and sprout configuration were assessed by immunohistochemical wholemount staining techniques and confocal laser microscopy. Cumulative sprout length of spheroids was quantitatively analyzed by digital imaging planimetry. In this model HUVECs and hOBs formed heterogeneous cospheroids with distinct spatial organization. The ability of HUVEC spheroids to form tubelike structures on angiogenic stimulation with vascular endothelial growth factor and basic fibroblast growth factor was suppressed in heterogeneous HUVEC/hOB cospheroids. The model system introduced in this study may be useful to assess the mechanisms involved in regulating angiogenesis during bone formation and to further investigate the mechanisms by which heterotypic cell-cell interactions inhibit endothelial tube formation for applications in bone tissue engineering.