Endothelial cells undergo branching morphogenesis to form capillary tubes. We have utilized an in vitro Matrigel overlay assay to analyze the role of the cytoskeleton and Rho GTPases during this process. The addition of matrix first induces changes in cell morphology characterized by the formation of dynamic cellular protrusions and the assembly of discrete aggregates or cords of aligned cells resembling primitive capillary-like structures, but without a recognizable lumen. This is followed by cell migration leading to the formation of a complex interconnecting network of capillary tubes with readily identifiable lumens. Inhibition of actin polymerization or actin-myosin contraction inhibits cell migration but has no effect on the initial changes in endothelial cell morphology. However, inhibition of microtubule dynamics prevents both the initial cell shape changes as well as cell migration. We find that the small GTPase Rac is essential for the matrix-induced changes in endothelial cell morphology, whereas p21-activated kinase, an effector of Rac, is required for cell motility. We conclude that Rac integrates signaling through both the actin and microtubule cytoskeletons to promote capillary tube assembly.