The molecular mechanisms of endothelial differentiation into a functional vascular network are incompletely understood. To identify novel factors in endothelial development, we used a microarray screen with differentiating embryonic stem (ES) cells that identified the gene for ankyrin repeat and SOCS box protein 4 (ASB4) as the most highly differentially expressed gene in the vascular lineage during early differentiation. Like other SOCS box-containing proteins, ASB4 is the substrate recognition molecule of an elongin B/elongin C/cullin/Roc ubiquitin ligase complex that mediates the ubiquitination and degradation of substrate protein(s). High levels of ASB4 expression in the embryonic vasculature coincide with drastic increases in oxygen tension as placental blood flow is initiated. However, as vessels mature and oxygen levels stabilize, ASB4 expression is quickly downregulated, suggesting that ASB4 may function to modulate an endothelium-specific response to increasing oxygen tension. Consistent with the hypothesis that ASB4 function is regulated by oxygen concentration, ASB4 interacts with the factor inhibiting HIF1alpha (FIH) and is a substrate for FIH-mediated hydroxylation via an oxygen-dependent mechanism. Additionally, overexpression of ASB4 in ES cells promotes differentiation into the vascular lineage in an oxygen-dependent manner. We postulate that hydroxylation of ASB4 in normoxia promotes binding to and degradation of substrate protein(s) to modulate vascular differentiation.