Microvascular mural or perivascular cells are required for the stabilization and maturation of the remodeling vasculature. However, much less is known about their biology and function compared to large vessel smooth muscle cells. We have developed lines of multipotent mesenchymal cells from human embryonic stem cells (hES-MC); we hypothesize that these can function as perivascular mural cells. Here we show that the derived cells do not form teratomas in SCID mice and independently derived lines show similar patterns of gene expression by microarray analysis. When exposed to platelet-derived growth factor-BB, the platelet-derived growth factor receptor β is activated and hES-MC migrate in response to a gradient. We also show that in a serum-free medium, transforming growth factor β1 (TGFβ1) induces robust expression of multiple contractile proteins (α smooth muscle actin, smooth muscle myosin heavy chain, smooth muscle 22α, and calponin). TGFβ1 signaling is mediated through the TGFβR1/Alk5 pathway as demonstrated by inhibition of α smooth muscle actin expression by treatment of the Alk5-specific inhibitor SB525334 and stable retroviral expression of the Alk5 dominant negative (K232R). Coculture of human umbilical vein endothelial cell (HUVEC) with hES-MC maintains network integrity compared to HUVEC alone in three-dimensional collagen I-fibronectin by paracrine signaling. Using high-resolution laser confocal microscopy, we show that hES-MC also make direct contact with HUVEC. This demonstrates that hESC-derived mesenchymal cells possess the molecular machinery expected in a perivascular progenitor cells and can play a functional role in stabilizing EC networks in in vitro three-dimensional culture.