The formation of primitive (embryonic) blood in vertebrates is mediated by spatio-temporally restricted signaling between different tissue layers. In Xenopus, in which primitive blood originates in the ventral blood island, this involves the secretion of bone morphogenetic protein (BMP) ligands by the ectoderm that signal to the underlying mesoderm during gastrulation. Using novel transgenic reporter lines, we report that the canonical Wnt/β-catenin pathway is also activated in the blood islands in Xenopus. Furthermore, Wnt-reporter activity was also detected in the blood islands of the mouse yolk sac. By using morpholino-mediated depletion in Xenopus, we identified Wnt4 as the ligand that is expressed in the mesoderm of the ventral blood island and is essential for the expression of hematopoietic and erythroid marker genes. Injection of an inducible Wnt-interfering construct further showed that, during gastrulation, Wnt/β-catenin signaling is required both in the mesoderm and in the overlying ectoderm for the formation of the ventral blood island. Using recombination assays with embryonic explants, we document that ectodermal BMP4 expression is dependent on Wnt4 signals from the mesoderm. Our results thus reveal a unique role for Wnt4-mediated canonical signaling in the formation and maintenance of the ventral blood island in Xenopus.