β-catenin regulates the transcription of genes involved in diverse biological processes, including embryogenesis, tissue homeostasis and regeneration. Endothelial cell (EC)-specific gene-targeting analyses in mice have revealed that β-catenin is required for vascular development. However, the precise function of β-cateninmediated gene regulation in vascular development is not well understood, since β-catenin regulates not only gene expression but also the formation of cell-cell junctions. To address this question, we have developed a novel transgenic zebrafish line that allows the visualization of β-catenin transcriptional activity specifically in ECs and discovered that β-catenin-dependent transcription is central to the bone morphogenetic protein (Bmp)-mediated formation of venous vessels. During caudal vein (CV) formation, Bmp induces the expression of aggf1, a putative causative gene for KlippelTrenaunay syndrome, which is characterized by venous malformation and hypertrophy of bones and soft tissues. Subsequently, Aggf1 potentiates β-catenin transcriptional activity by acting as a transcriptional co-factor, suggesting that Bmp evokes β-catenin-mediated gene expression through Aggf1 expression. Bmp-mediated activation of β-catenin induces the expression of Nr2f2 (also known as Coup-TFII), a member of the nuclear receptor superfamily, to promote the differentiation of venous ECs, thereby contributing to CV formation. Furthermore, β-catenin stimulated by Bmp promotes the survival of venous ECs, but not that of arterial ECs. Collectively, these results indicate that Bmp-induced activation of β-catenin through Aggf1 regulates CV development by promoting the Nr2f2-dependent differentiation of venous ECs and their survival. This study demonstrates, for the first time, a crucial role of β-catenin-mediated gene expression in the development of venous vessels.