BACKGROUND: Corticosteroids are commonly used to treat infantile hemangioma, but the mechanism of action of this therapy is unknown. We investigated the effect of corticosteroids in a previously described in vivo model of infantile hemangioma and in cultured hemangioma-derived cells. METHODS: We tested hemangioma-derived stem cells for vasculogenic activity in vivo after implantation into immune-deficient (nude) mice. We studied dexamethasone treatment of both the cells before implantation and the mice after implantation. We also tested hemangioma-derived stem cells for expression of vascular endothelial growth factor A (VEGF-A) in vitro and studied the inhibition of VEGF-A expression, using short hairpin RNA (shRNA) in vivo and in vitro. RESULTS: Systemic treatment with dexamethasone led to dose-dependent inhibition of tumor vasculogenesis in the murine model. Pretreatment of hemangioma-derived stem cells in vitro before implantation also inhibited vasculogenesis. Dexamethasone suppressed VEGF-A production by hemangioma-derived stem cells in vitro but not by hemangioma-derived endothelial cells or human umbilical-vein endothelial cells. Silencing VEGF-A in hemangioma-derived stem cells reduced vasculogenesis in vivo. VEGF-A was detected in hemangioma specimens in the proliferating phase but not in the involuting phase and was shown by immunostaining to reside outside of vessels. Corticosteroid treatment suppressed other proangiogenic factors in hemangioma-derived stem cells, including urokinase plasminogen activator receptor, interleukin-6, monocyte chemoattractant protein 1, and matrix metalloproteinase 1. CONCLUSIONS: In a murine model, dexamethasone inhibited the vasculogenic potential of stem cells derived from human infantile hemangioma. The corticosteroid also inhibited the expression of VEGF-A by hemangioma-derived stem cells, and silencing of VEGF-A expression in these cells inhibited vasculogenesis in vivo.