VEGF is the key growth factor regulating arterial morphogenesis. However, molecular events involved in this process have not been elucidated. Synectin null mice demonstrate impaired VEGF signaling and a marked reduction in arterial morphogenesis. Here, we show that this occurs due to delayed trafficking of VEGFR2-containing endosomes that exposes internalized VEGFR2 to selective dephosphorylation by PTP1b on Y(1175) site. Synectin involvement in VEGFR2 intracellular trafficking requires myosin-VI, and myosin-VI knockout in mice or knockdown in zebrafish phenocopy the synectin null phenotype. Silencing of PTP1b restores VEGFR2 activation and significantly recovers arterial morphogenesis in myosin-VI(-/-) knockdown zebrafish and synectin(-/-) mice. We conclude that activation of the VEGF-mediated arterial morphogenesis cascade requires phosphorylation of the VEGFR2 Y(1175) site that is dependent on trafficking of internalized VEGFR2 away from the plasma membrane via a synectin-myosin-VI complex. This key event in VEGF signaling occurs at an intracellular site and is regulated by a novel endosomal trafficking-dependent process.