Pericytes play an important role in modulating angiogenesis, but the origin of these cells is poorly understood. To evaluate whether the mature vessel wall contains pericyte progenitor cells, non-endothelial mesenchymal cells isolated from the rat aorta were cultured in a serum-free medium optimized for stem cells. This method led to the isolation of anchorage-independent cells that proliferated slowly in suspension, forming spheroidal colonies. This process required bFGF in the culture medium because bFGF withdrawal caused the cells to attach to the culture dish and irreversibly lose their capacity to grow in suspension. Immunocytochemistry and RT-PCR analysis revealed expression of the precursor cell markers CD34 and Tie-2, and absence of endothelial (CD31 and eNOS) and smooth muscle cell (alpha-smooth muscle actin) markers. In addition, spheroid-forming cells were positive for NG2, nestin, PDGFR-alpha and PDGFR-beta. Upon exposure to serum these cells lost CD34 expression , acquired alpha-smooth muscle actin and attached to the culture dish. Returning these cells to serum-free medium failed to restore their original spheroid phenotype, suggesting terminal differentiation. When embedded in collagen gels, spheroid-forming cells rapidly migrated in response to PDGF-BB and became dendritic. Spheroid forming cells co-cultured in collagen with angiogenic outgrowths of rat aorta or isolated endothelial cells transformed into pericytes. These results demonstrate that the rat aorta contains primitive mesenchymal cells capable of pericyte differentiation. These immature cells may represent an important source of pericytes during angiogenesis in physiologic and pathologic processes. They may also provide a convenient supply of mural cells for vascular bioengineering applications.