Research in the past 10 years has dramatically increased our knowledge of the development of the mammalian hematopoietic system and has provided insight into the embryonic sites of hematopoietic cell generation, the variety of hematopoietic cell types produced, and some of the microenvironmental influences on the rapidly growing blood system. Indeed, within mammalian embryos, it is now widely accepted that the embryo proper produces the first adult repopulating hematopoietic stem cells. This mesodermally derived intraembryonic region, known as the aorta-gonad-mesonephros region or, at a slightly earlier developmental stage, the paraaortic splanchnopleura, produces, respectively, potent hematopoietic stem cells and multipotent progenitor cells before their appearance in the yolk sac. This review focuses on the most recent findings concerning qualitative and quantitative aspects of hematopoietic stem-cell development, the endothelium as a possible direct precursor population of hematopoietic stem cells, and the microenvironment leading to the onset and maintenance of hematopoietic stem cells in the mammalian embryo.