The hyaluronic acid receptor for endocytosis Stabilin-2/HARE mediates systemic clearance of multiple glycosaminoglycans from the vascular and lymphatic circulations. In addition, recent in vitro studies indicate that Stab2 can participate in signal transduction by interacting with hyaluronic acid (HA), which results in Erk phosphorylation. However, it is not known whether Stab2 function or HA-Stab2 signaling play any role in embryonic development. Here we show that Stab2 functions in a signal transduction pathway regulating arterial-venous differentiation during zebrafish embryogenesis. Stab2 morpholino knockdown embryos (morphants) display an absence of intersegmental vessels and defects in the axial vessel formation. In addition, Stab2 morphants show defects in arterial-venous differentiation including the expansion of venous marker expression. Simultaneous knockdown of Stabilin-2 and Has2, an HA synthetase, results in a synergistic effect, arguing that HA and Stab2 interact during vasculature formation. Stab2 morphants display reduced Erk phosphorylation in the arterial progenitors, which is a known transducer of VEGF signaling, previously associated with arterial-venous differentiation. In addition, VEGF signaling acts as a negative feedback loop to repress stab2 expression. These results argue that Stab2 is involved in a novel signaling pathway that plays an important role in regulating Erk phosphorylation and establishing arterial-venous identity.