During lymphangiogenesis in the mammalian embryo, a subset of vascular endothelial cells in the cardinal veins is reprogrammed to adopt a lymphatic endothelial fate. The prevailing model of lymphangiogenesis contends that these lymphatic precursor cells migrate away from the cardinal veins and reassemble peripherally as lymph sacs from which a lymphatic vasculature is generated. However, this model fails to account for a number of observations that, as a result, have remained anecdotal. Here, we use optical projection tomography, confocal microscopy and in vivo live imaging to uncover three key stages of lymphatic vascular morphogenesis in the mouse embryo at high resolution. First, we define territories or “pre-lymphatic clusters” of Prox1-positive lymphatic endothelial progenitor cells along the antero-posterior axis of the cardinal veins. Second, these pre-lymphatic clusters undergo progressive extrusion (“ballooning”) to generate primitive lymph sacs. Third, lymphatic vessels emerge by a combination of mechanisms including sprouting from the lymph sacs and direct delamination of streams of cells from the cardinal veins. Our data support a new model for lymphatic vascular patterning and morphogenesis, as a basis for identifying the molecular cues governing these processes.