Vasculogenesis and hematopoiesis are thought to arise in hemangioblasts, the common progenitors of cells in vessels and in blood. This scheme was challenged by kinetic analysis of vascular endothelial and hematopoietic progenitors in early gastrulating mouse embryos. The OP-9 co-culture system with a combination of cytokines permitted the detection of endothelial progenitors, as well as stroma-dependent hematopoietic progenitors. Endothelial progenitors were detected as early as embryonic day (E) 5.50, after which time their numbers increased. Stroma-dependent hematopoietic progenitors were detected at E6.75, the time point when hemangioblasts reportedly emerge. Colony-forming units in culture (CFU-c), most likely generated from stroma-dependent hematopoietic progenitors via contact with the microenvironment, were detected at E7.50, concomitant with the onset of primitive hematopoiesis in the yolk sac. The presence of nucleated erythrocytes and the expression of an embryonic-type globin in erythroid colonies derived from stroma-dependent hematopoietic progenitors and from CFU-c support the notion that these progenitors coordinately establish primitive hematopoiesis. Using Oct3/4 promoter-driven GFP transgenic mice, early endothelial progenitors, stroma-dependent hematopoietic progenitors, and CFU-c were all shown to express the Oct3/4 transcription factor. Among Oct3/4-positive cells, both endothelial and hematopoietic progenitors were present in the CD31-positive fraction, leaving a subset of endothelial progenitors in the CD31-negative fraction. These data imply that Oct3/4-positive mesoderm gives rise to CD31-negative angioblasts, CD31-positive angiboblasts and CD31-positive hemangioblasts. We propose a distinct developmental pathway in which the angioblast lineage directly diverges from mesoderm prior to and independent of hemangioblast development.