Mechanisms underlying tumor vasculogenesis, the homing and engraftment of bone marrow-derived vascular progenitors, remain undefined. We hypothesized that tumor cell-secreted factors regulate vasculogenesis. We studied vasculogenic and nonvasculogenic intracranial murine gliomas. A PCR screen identified stromal-derived factor-1 (SDF-1/CXCL12) and vascular endothelial growth factor (VEGF) expression by vasculogenic glioma cells and spontaneously arising vasculogenic tumors in NF1+/-:Trp53+/- mice, but not by nonvasculogenic glioma cells. Enforced SDF-1, not VEGF, expression in nonvasculogenic cells caused vasculogenesis. Combined SDF-1 and VEGF expression augmented vasculogenesis over SDF-1 expression alone. Blocking SDF-1 receptor CXCR4 reduced short-term homing and long-term engraftment of vascular progenitors. Implanting tumor cells secreting SDF-1 was therefore necessary and sufficient to incorporate marrow-derived precursors into tumor endothelium. SDF-1 seemed to exert these effects by acting locally intratumorally and did not cause an efflux of marrow-derived progenitors into circulation. Tumor microenvironment determined additional fates of marrow-derived cells. Hypoxia, observed with ectopic s.c. murine tumors at levels approximating that of intracranial human glioblastoma, interacted with tumor-secreted SDF-1 to expand engrafted vascular progenitor differentiated phenotypes to include pericytes as well as endothelium. In contrast, less hypoxic orthotopic intracranial murine gliomas contained only marrow-derived endothelium without marrow-derived pericytes. Furthermore, we found that vasculogenesis is significant for tumors because it generates endothelium with a higher mitotic index than endothelium derived from local sources. Although CXCR4 blockade selectively targeted endothelium generated by vasculogenesis, completely inhibiting vessel formation may require combination therapy targeting locally derived and marrow-derived endothelium.