The limited vessel-forming capacity of infused endothelial progenitor cells (EPCs) into patients with cardiovascular dysfunction may be related to a misunderstanding of the biologic potential of the cells. EPCs are generally identified by cell surface antigen expression or counting in a commercially available kit that identifies “endothelial cell colony-forming units” (CFU-ECs). However, the origin, proliferative potential, and differentiation capacity of CFU-ECs is controversial. In contrast, other EPCs with blood vessel-forming ability, termed endothelial colony-forming cells (ECFCs), have been isolated from human peripheral blood. We compared the function of CFU-ECs and ECFCs and determined that CFU-ECs are derived from the hematopoietic system using progenitor assays, and analysis of donor cells from polycythemia vera patients harboring a Janus kinase 2 V617F mutation in hematopoietic stem cell clones. Further, CFU-ECs possess myeloid progenitor cell activity, differentiate into phagocytic macrophages, and fail to form perfused vessels in vivo. In contrast, ECFCs are clonally distinct from CFU-ECs, display robust proliferative potential, and form perfused vessels in vivo. Thus, these studies establish that CFU-ECs are not EPCs and the role of these cells in angiogenesis must be re-examined prior to further clinical trials, whereas ECFCs may serve as a potential therapy for vascular regeneration.