The development of decellularised scaffolds for small diameter vascular grafts is hampered by their limited patency, due to the lack of luminal cell coverage by endothelial cells (EC) and to the low tone of the vessel due to absence of a contractile smooth muscle cells (SMC). In this study, we identify a population of vascular progenitor c-Kit+/Sca-1- cells available in large numbers and derived from immuno-privileged embryonic stem cells (ESCs). We also define an efficient and controlled differentiation protocol yielding fully to differentiated ECs and SMCs in sufficient numbers to allow the repopulation of a tissue engineered vascular graft. When seeded ex vivo on a decellularised vessel, c-Kit+/Sca-1-derived cells recapitulated the native vessel structure and upon in vivo implantation in the mouse, markedly reduced neointima formation and mortality, restoring functional vascularisation. We showed that Krüppel-like transcription factor 4 (Klf4) regulates the choice of differentiation pathway of these cells through β-catenin activation and was itself regulated by the canonical Wnt pathway activator lithium chloride. Our data show that ESC-derived c-Kit+/Sca-1-cells can be differentiated through a Klf4/β-catenin dependent pathway and are a suitable source of vascular progenitors for the creation of superior tissue-engineered vessels from decellularised scaffolds.