During embryonic lymphatic development, Prox1 homeobox transcription factor is expressed in a subset of venous blood vascular endothelial cells (BECs) in which COUP‐TFII orphan nuclear receptor is highly expressed. Prox1 induces differentiation of BECs into lymphatic endothelial cells (LECs) by inducing the expression of various LEC markers including vascular endothelial growth factor receptor 3 (VEGFR3). However, the molecular mechanisms of how transcriptional activities of Prox1 are regulated are largely unknown. In the present study, we show that COUP‐TFII plays important roles in the regulation of the function of Prox1. In BECs and LECs, Prox1 promotes the proliferation and migration toward VEGF‐C by inducing the expression of cyclin E1 and VEGFR3, respectively. Gain‐of‐function studies showed that COUP‐TFII negatively regulates the effects of Prox1 in BECs and LECs whereas loss‐of‐function studies showed that COUP‐TFII negatively and positively regulates Prox1 in BECs and LECs, respectively. We also show that endogenous Prox1 and COUP‐TFII physically interact in LECs and that both Prox1 and COUP‐TFII bind to the endogenous cyclin E1 promoter. These results suggest that COUP‐TFII physically and functionally interact during differentiation and maintenance of lymphatic vessels.