Normal heart development requires appropriate levels of retinoic acid (RA) signaling. RA levels in embryos are dampened by Cyp26 enzymes, which metabolize RA into easily degraded derivatives. Loss of Cyp26 function in humans is associated with numerous developmental syndromes that include cardiovascular defects. Although previous studies have shown that Cyp26-deficient vertebrate models also have cardiovascular defects, the mechanisms underlying these defects are not understood. Here, we found that in zebrafish, two Cyp26 enzymes, Cyp26a1 and Cyp26c1, are expressed in the anterior lateral plate mesoderm (ALPM) and predominantly overlap with vascular progenitors (VPs). Although singular knockdown of Cyp26a1 or Cyp26c1 does not overtly affect cardiovascular development, double Cyp26a1 and Cyp26c1 (referred to here as Cyp26)-deficient embryos have increased atrial cells and reduced cranial vasculature cells. Examining the ALPM using lineage tracing indicated that in Cyp26-deficient embryos the myocardial progenitor field contains excess atrial progenitors and is shifted anteriorly into a region that normally solely gives rise to VPs. Although Cyp26 expression partially overlaps with VPs in the ALPM, we found that Cyp26 enzymes largely act cell non-autonomously to promote appropriate cardiovascular development. Our results suggest that localized expression of Cyp26 enzymes cell non-autonomously defines the boundaries between the cardiac and VP fields within the ALPM through regulating RA levels, which ensures a proper balance of myocardial and endothelial lineages. Our study provides novel insight into the earliest consequences of Cyp26 deficiency that underlie cardiovascular malformations in vertebrate embryos.