A key feature of arteriogenesis is capillary-to-arterial endothelial cell fate transition. Although a number of studies in the past two decades suggested this process is driven by VEGF activation of Notch signaling, how arteriogenesis is regulated remains poorly understood. Here we report that arterial specification is mediated by fluid shear stress (FSS) independent of VEGFR2 signaling and that a decline in VEGFR2 signaling is required for arteriogenesis to fully take place. VEGF does not induce arterial fate in capillary ECs and, instead, counteracts FSS-driven capillary-to-arterial cell fate transition. Mechanistically, FSS-driven arterial program involves both Notch-dependent and Notch-independent events. Sox17 is the key mediator of the FSS-induced arterial specification and a target of VEGF-FSS competition. These findings suggest a new paradigm of VEGF-FSS crosstalk coordinating angiogenesis, arteriogenesis and capillary maintenance.