Critical limb ischemia is a condition in which tissue necrosis occurs due to arterial occlusion, resulting in limb amputation in severe cases. Both endothelial cells (ECs) and vascular smooth muscle cells (SMCs) are needed for the regeneration of peripheral arteries in ischemic tissues. However, it is difficult to isolate and cultivate primary EC and SMC from patients for therapeutic angiogenesis. Induced pluripotent stem cells (iPSCs) are regarded as useful stem cells due to their pluripotent differentiation potential. In this study, we explored the therapeutic efficacy of human iPSC‐derived EC and iPSC‐derived SMC in peripheral artery disease model. After the induction of mesodermal differentiation of iPSC, CD34+ progenitor cells were isolated by magnetic‐activated cell sorting. Cultivation of the CD34+ progenitor cells in endothelial culture medium induced the expression of endothelial markers and phenotypes. Moreover, the CD34+ cells could be differentiated into SMC by cultivation in SMC culture medium. In a murine hindlimb ischemia model, cotransplantation of EC with SMC improved blood perfusion and increased the limb salvage rate in ischemic limbs compared to transplantation of either EC or SMC alone. Moreover, cotransplantation of EC and SMC stimulated angiogenesis and led to the formation of capillaries and arteries/arterioles in vivo. Conditioned medium derived from SMC stimulated the migration, proliferation, and tubulation of EC in vitro, and these effects were recapitulated by exosomes isolated from the SMC‐conditioned medium. Together, these results suggest that iPSC‐derived SMC enhance the therapeutic efficacy of iPSC‐derived EC in peripheral artery disease via an exosome‐mediated paracrine mechanism.