Outgrowth endothelial cells (OECs) can induce de novo blood vessel formation in vivo. The vasculogenic ability of OECs is comprised in diabetes with much lower proliferative potential and reduced ability to respond to proangiogenic cytokines. This results in impaired vascular repair leading to ischaemia which is commonly observed in diabetic complications such as retinopathy due to decreased vascular supply. We replicated the low O2 environment of an ischemic retina by exposing OECs isolated from umbilical cords to 1% O2 and assessed their response at the molecular level. Together with their morphology, high proliferative potential and immunophenotypic expression profile, OEC identity was confirmed in accordance with the phenotype described in the literature. Exposing OECs to 1% O2 induced a state of hypoxia as we were able to detect HIF1α, 2α proteins which accumulate under low O2 conditions. OECs in 1% O2 exhibited an increase in filamentous actin staining, focal adhesion deposition and also enhanced migration indicating that OECs in hypoxia adapt a pro-migratory phenotype. Hypoxia also induced a state of stress-induced premature senescence. We observed a decrease in cell proliferation, changes in morphology and positive staining for β-gal a surrogate marker of cell senescence. There was also a decrease in expression of markers such as CD34, commonly associated with “stemness” after chronic exposure to hypoxia. Molecular analysis identified that bone morphogenetic protein 4 (BMP4) and several Smad pathway associated genes were up-regulated under hypoxia. We therefore hypothesised that BMP4 and its Smad pathway associated genes are HIF dependent and may play a role in OEC function. We were unable to detect any significant BMP4 activity via ELISA or Western blot either in hypoxic or normoxic conditions. However acute exposure to hypoxia down regulated inhibitory Smad6 protein, which was recovered with MG132 treatment suggesting proteasome dependant degradation. Gremlin, a potent BMP4 inhibitor has been implicated as a proangiogenic cytokine in human umbilical vein endothelial cells. We are now assessing the role of gremlin in OEC function in normoxic and hypoxic conditions. These data taken together should enhance our knowledge of vascular stem cell function in ischaemic diseases.