The source of tissue turnover during homeostasis or following injury is usually due to proliferation of a small number of resident, lineage-restricted stem cells that have the ability to amplify and differentiate into mature cell types. We are studying vascular regeneration in a chordate model organism, Botryllus schlosseri, and have previously found that following surgical ablation of the extracorporeal vasculature, new tissue will regenerate in a VEGF-dependent process within 48 hrs. Here we use a novel vascular cell lineage tracing methodology to assess regeneration in parabiosed individuals and demonstrate that the source of regenerated vasculature is due to the proliferation of pre-existing vascular resident cells and not a mobile progenitor. We also show that these cells are bi-potential, and can reversibly adopt two fates, that of the newly forming vessels or the differentiated vascular tissue at the terminus of the vasculature, known as ampullae. In addition, we show that pre-existing vascular resident cells differentially express progenitor and differentiated cell markers including the Botryllus homologs of CD133, VEGFR-2, and Cadherin during the regenerative process.