The molecular mechanisms that regulate and coordinate signaling between the extracellular matrix (ECM) and cells contributing to the developing vasculature are complex and poorly understood. Myocardin-like protein 2 (MKL2) is a transcriptional co-activator that in response to RhoA and cytoskeletal actin signals physically associates with serum response factor (SRF), activating a subset of SRF-regulated genes. We now report the discovery of a previously undescribed MKL2/TGFβ signaling pathway in embryonic stem (ES) cells that is required for maturation and stabilization of the embryonic vasculature. Mkl2–/– null embryos exhibit profound derangements in the tunica media of select arteries and arterial beds, which leads to aneurysmal dilation, dissection and hemorrhage. Remarkably, TGFβ expression, TGFβ signaling and TGFβ-regulated genes encoding ECM are downregulated in Mkl2–/– ES cells and the vasculature of Mkl2–/– embryos. The gene encoding TGFβ2, the predominant TGFβ isoform expressed in vascular smooth muscle cells and embryonic vasculature, is activated directly via binding of an MKL2/SRF protein complex to a conserved CArG box in the TGFβ2 promoter. Moreover, Mkl2–/– ES cells exhibit derangements in cytoskeletal organization, cell adhesion and expression of ECM that are rescued by forced expression of TGFβ2. Taken together, these data demonstrate that MKL2 regulates a conserved TGF-β signaling pathway that is required for angiogenesis and ultimately embryonic survival.