Mouse embryos lacking the polycomb group gene member Yin-Yang1 (YY1) die during the peri-implantation stage. To assess the post-gastrulation role of YY1, a conditional knock-out (cKO) strategy was used to delete YY1 from the visceral endoderm of the yolk sac and the definitive endoderm of the embryo. cKO embryos display profound yolk sac defects at 9.5 days post coitum (dpc), including disrupted angiogenesis in mesoderm derivatives and altered epithelial characteristics in the visceral endoderm. Significant changes in both cell death and proliferation were confined to the YY1-expressing yolk sac mesoderm indicating that loss of YY1 in the visceral endoderm causes defects in the adjacent yolk sac mesoderm. Production of Vascular Endothelial Growth Factor A (VEGFA) by the visceral endoderm is essential for normal growth and development of the yolk sac vasculature. Reduced levels of VEGFA are observed in the cKO yolk sac, suggesting a cause for the angiogenesis defects. Ex vivo culture with exogenous VEGF not only rescued angiogenesis and apoptosis in the cKO yolk sac mesoderm, but also restored the epithelial defects observed in the cKO visceral endoderm. Intriguingly, blocking the activity of the mesoderm-localized VEGF receptor, FLK1, recapitulates both the mesoderm and visceral endoderm defects observed in the cKO yolk sac. Taken together, these results demonstrate that YY1 is responsible for maintaining VEGF in the developing visceral endoderm and that a VEGF-responsive paracrine signal, originating in the yolk sac mesoderm, is required to promote normal visceral endoderm development.