During embryogenesis, lymphatic endothelial progenitor cells first arise from a subset of blood vascular endothelial cells in the dorsolateral aspects of the cardinal veins. The molecular cues responsible for defining the regionalisation of such a discrete pool of progenitors remain uncharacterised. Here we identify a novel function for CYP26B1, an enzyme known to play a role in tissue morphogenesis by fine-tuning retinoic acid (RA) concentration, in regulating lymphangiogenesis. Cyp26b1-null mice, in which RA levels are elevated, exhibited an increased number of lymphatic endothelial progenitor cells in the cardinal veins, together with hyperplastic, blood filled lymph sacs and hyperplastic dermal lymphatic vessels. Conversely, mice over-expressing Cyp26b1 had hypoplastic lymph sacs and lymphatic vessels. Our data suggest that RA clearance by CYP26B1 in the vicinity of lymphatic endothelial progenitor cells is important for determining the position and size of the progenitor pool specified. Our studies identify a genetic pathway that underpins the architecture of the developing lymphatics and define CYP26B1 as a novel modulator of lymphatic vascular patterning.