In the embryo, the decision to become an endothelial cell (EC) is a bold choice that commits a cell to the task of generating the blood and lymphatic vascular systems, which form one of the most important and complex organs in the mammalian body. Embryonic blood vessel formation is guided by incompletely understood developmental cues, which give rise to a vascular network with remarkable precision and reproducibility with respect to the network’s organization, branching pattern, treelike hierarchy of vessel sizes, and formation of arteries, veins, and lymphatic vessels (Risau 1997; Weinstein 1999). The decision of choosing a hematopoietic cell (HPC) fate is an equally complex undertaking. Yet, the blood circulatory system formed principally by these two differentiation lineages and by the cardiogenic mesenchyme is the first functional organ system formed during embryonic development. During early mouse embryogenesis, starting at embryonic day 7.5 (E7. 5), HPCs are generated in a close association with the developing vascular system. In the blood islands of the yolk sac where the earliest HPCs appear, both HPC and EC lineages arise almost simultaneously from extraembryonic mesoderm, forming structures in which primitive erythrocytes are surrounded by a layer of angioblasts that give rise to differentiated ECs. The close temporal and spatial relationship of hematopoietic and vascular development led to the hypothesis that the two lineages arise from a common precursor, the hemangioblast (Sabin 1920; Murray 1932). This concept is supported by the shared expression of a number of different genes by both lineages. In contrast to commonly used endothelial markers such as CD34 and Tie2 that are also expressed in adult hematopoietic stem cells (HSCs), Flk1/vascular endothelial growth factor (VEGF) receptor-2 (hereafter VEGFR-2) expression is unique in that it is restricted to the mesodermal precursor cells and ECs, and is down-regulated in HPCs (Risau 1997). It is now well established that VEGFR-2+ cells represent a common precursor for ECs and HPCs (Kennedy et al. 1997; Choi et al. 1998; Nishikawa et al. 1998). However, the pathway downstream of VEGFR-2 signaling has not been established in the hemangioblasts. In this issue of Genes & Development, Ema and colleagues (2003) demonstrate that the transcription factor Tal1/SCL (T-cell acute leukemia/stem cell leukemia) regulates the choice of cell fate in early development into EC, HPC, and smooth muscle cell (SMC) lineages. These results provide an important additional piece into the emerging tentative differentiation scheme of embryonic and adult HPCs and ECs (Fig. 1).