Angiogenesis does not only depend on endothelial cell invasion and proliferation: it also requires pericyte coverage of vascular sprouts for vessel stabilization. These processes are coordinated by vascular endothelial growth factor (VEGF) and platelet-derived growth factor (PDGF) through their cognate receptors on endothelial cells and vascular smooth muscle cells (VSMCs), respectively. PDGF induces neovascularization by priming VSMCs/pericytes to release pro-angiogenic mediators. Although VEGF directly stimulates endothelial cell proliferation and migration, its role in pericyte biology is less clear. Here we define a role for VEGF as an inhibitor of neovascularization on the basis of its capacity to disrupt VSMC function. Specifically, under conditions of PDGF-mediated angiogenesis, VEGF ablates pericyte coverage of nascent vascular sprouts, leading to vessel destabilization. At the molecular level, VEGF-mediated activation of VEGF-R2 suppresses PDGF-Rbeta signalling in VSMCs through the assembly of a previously undescribed receptor complex consisting of PDGF-Rbeta and VEGF-R2. Inhibition of VEGF-R2 not only prevents assembly of this receptor complex but also restores angiogenesis in tissues exposed to both VEGF and PDGF. Finally, genetic deletion of tumour cell VEGF disrupts PDGF-Rbeta/VEGF-R2 complex formation and increases tumour vessel maturation. These findings underscore the importance of VSMCs/pericytes in neovascularization and reveal a dichotomous role for VEGF and VEGF-R2 signalling as both a promoter of endothelial cell function and a negative regulator of VSMCs and vessel maturation.