Epithelial linings serve as the barrier between deeper tissues and external environment, and hence protects against various mechanical, chemical and biological insults. Development of three dimensional (3D) in vitro skin tissue equivalents is a key step in the field of drug discovery and bio-pharmaceutical applications. Current models, use monolayer cultures of primary cells, immortalized cell lines and/or animal models have yielded valuable insights to understand the biology and pathophysiology of skin. However, existing models have their own limitations such as, tissue relevance, longevity of functional tissues and multiple source of the cells involved. Hereby, we aimed to develop in vitro 3D skin along with dermal component embedded with functional network of blood vessels. Fabrication of such complex tissue equivalents requires the multi-culture of appropriate cell types such as skin keratinocytes (KCs), fibroblasts (Fib), endothelial cells (ECs) and vascular smooth muscle cells (vSMCs). We used human embryonic stem cells (hESCs) as the single cell source for the subsequent derivation of all the desired cell types. Fibrin-based dermal matrix was used as scaffold in the generation skin constructs. In conclusion, we demonstrated the establishment of in vitro vascularized 3D skin from hESC derived cells under relatively xeno-free microenvironment. We also validated the skin models and the utility of these models was shown in toxicity assays, drug permeation, and reflecting the disease condition as well as aimed for large scale production of our technology. From a future outlook and scope, we believe that hESC-derived skin models could be potential platforms in studying novel formulations, drug development, disease modelling and various other pre-clinical, clinical, and industrial applications.