VEGFR3 and its ligand VEGF-C are essential for lymphatic growth, but sinusoids in hematopoietic organs also express high levels of VEGFR3. Here we define a reciprocal VEGF-C/VEGFR3–CDH5 (VE-cadherin) signaling axis that controls both sinusoidal and lymphatic vessel growth. Loss of VEGF-C or VEGFR3 resulted in cutaneous edema, reduced fetal liver size and bloodless bone marrow due to impaired lymphatic and sinusoidal vessel growth, phenotypes shared with mice expressing membrane-retained VE-cadherin. In developing mice, loss of VE-cadherin rescued defects in sinusoidal and lymphatic growth conferred by loss of VEGFR3 but not loss of VEGF-C, findings explained by potentiated VEGF-C/VEGFR2 signaling. Mechanistically, VEGF-C/VEGFR3 signaling induces VE-cadherin endocytosis via SRC-mediated phosphorylation, whereas VE-cadherin prevents VEGFR3 endocytosis required for receptor signaling. These findings establish an essential role for VEGF-C/VEGFR3 signaling during sinusoidal vascular growth; identify VE-cadherin as a powerful negative regulator of VEGF-C signaling that acts through both VEGFR3 and VEGFR2 receptors; and suggest that negative regulation of VE-cadherin is required for effective VEGF-C/VEGFR3 signaling during growth of sinusoidal and lymphatic vessels.