Serum response factor (SRF) is a transcription factor required for mesoderm formation in the developing mouse embryo that is important for myogenic differentiation, including notably, the differentiation of the proepicardial organ (PEO) into coronary vascular cells during early development. To identify regulatory sequences that control SRF expression during early mouse development, we used a novel transgenic approach to study the role of conserved noncoding DNA sequences (CNCS) in the SRF gene. Embryonic stem (ES) cells containing a targeted single-copy of putative SRF regulatory sequences were used to directly generate transgenic embryos by tetraploid aggregation. Because the ES cell-derived targeted embryos are genetically equivalent, except for the putative regulatory sequence of interest, differences in transgene expression can be attributed directly to these sequences. Using this approach, we identified an E-box/Ets containing 270-bp cis-acting module in the SRF promoter that mediates expression in the PEO. Reporter transgenes containing this module express in derivatives of the PEO that give rise to the coronary vasculature, but do not express in the PEO-derived epicardium. These results are the first reported in vivo analysis of SRF regulatory elements that control expression during early development. Using this reporter module and this approach, it should be possible to begin to elucidate molecular mechanisms involved in the differentiation of coronary vasculature progenitor cells, as well as identify additional SRF regulatory elements important during mammalian development.