Lymphatic vessels are essential for immune surveillance, tissue fluid homeostasis and fat absorption. Defects in lymphatic vessel formation or function cause lymphedema. Here we show that the vascular endothelial growth factor C (VEGF-C) is required for the initial steps in lymphatic development. In Vegfc^−/− mice, endothelial cells commit to the lymphatic lineage but do not sprout to form lymph vessels. Sprouting was rescued by VEGF-C and VEGF-D but not by VEGF, indicating VEGF receptor 3 specificity. The lack of lymphatic vessels resulted in prenatal death due to fluid accumulation in tissues, and Vegfc^+/− mice developed cutaneous lymphatic hypoplasia and lymphedema. Our results indicate that VEGF-C is the paracrine factor essential for lymphangiogenesis, and show that both Vegfc alleles are required for normal lymphatic development.