Thalidomide [α-(N-phthalimido)-glutarimide] exerts antiangiogenic properties and causes cardiac malformations in embryos. Herein the effects of thalidomide on cardiovascular differentiation were investigated in mouse embryonic stem (ES) cell-derived embryoid bodies. Thalidomide inhibited the formation of capillary-like blood vessels and decreased tumor-induced angiogenesis in confrontation cultures of embryoid bodies and multicellular prostate tumor spheroids, but stimulated cardiomyogenesis of ES cells. The number of CD31- and CD144-positive endothelial cells was not impaired, suggesting that thalidomide acted on vascular tube formation and cell migration rather than endothelial differentiation. Thalidomide increased reactive oxygen species generation, which was abolished by the NADPH oxidase inhibitor VAS2870 and the complex I respiratory chain inhibitor rotenone. Conversely, thalidomide decreased nitric oxide (NO) generation and endothelial NO synthase activity. VAS2870 abrogated thalidomide stimulation of cardiomyogenesis, whereas inhibition of vasculogenesis persisted. In NOX-1 and NOX-4 shRNA gene-inactivated ES cells, cardiomyogenesis was severely impaired and thalidomide failed to stimulate cardiac cell commitment. The NO donor S-nitrosopenicillamine reversed the antiangiogenic effect of thalidomide and increased capillary structure formation, whereas scavenging NO by 2-(4-carboxyphenyl)-4,4,5,5-tetramethylimidazoline-1-oxyl-3-oxide and inhibition of endothelial NO synthase by N(G)-nitro-l-arginine methyl ester decreased cardiovascular differentiation. Our data demonstrate that thalidomide causes an imbalance of reactive oxygen species/NO generation, thus stimulating cardiomyogenesis and impairing vascular sprout formation.