Accumulating evidence suggests that in the vertebrate embryo, acquisition of arterial and venous identity is established early by genetic mechanisms, including those regulated by vascular endothelial growth factor (VEGF) and Notch signaling. However, although the COUP-TFII nuclear receptor has recently been shown to regulate vein identity, very little is known about the molecular mechanisms of transcriptional regulation in arterial specification. Here, we show that mouse embryos compound mutant for Foxc1 and Foxc2, two closely related Fox transcription factors, exhibit arteriovenous malformations and lack of induction of arterial markers whereas venous markers such as COUP-TFII are normally expressed, suggesting that mutant endothelial cells fail to acquire an arterial fate. Notably, consistent with this observation, overexpression of Foxc genes in vitro induces expression of arterial markers such as Notch1 and its ligand Delta-like 4 (Dll4), and Foxc1 and Foxc2 directly activate the Dll4 promoter via a Foxc-binding site. Moreover, compound Foxc mutants show a defect in sprouting of lymphatic endothelial cells from veins in early lymphatic development, due to reduced expression of VEGF-C. Taken together, our results demonstrate that Foxc transcription factors are novel regulators of arterial cell specification upstream of Notch signaling and lymphatic sprouting during embryonic development.