Bone morphogenetic protein (BMP) signaling is an important regulator of hematovascular development. However, the progenitor population that responds to BMP signaling is undefined, and the relative role of downstream mediators including Smad1 is unclear. We find that Smad1 shows a distinctive expression profile as embryonic stem (ES) cells undergo differentiation in the embryoid body (EB) system, with peak levels in cell populations enriched for the hemangioblast. To test the functional relevance of this observation, we generated an ES cell line that allows temporal control of ectopic Smad1 expression. Continuous expression of Smad1 from day 2 of EB culture does not disturb hematopoiesis, according to colony assays. In contrast, a pulse of Smad1 expression exclusively between day 2 and day 2.25 expands the population of progenitors for primitive erythroblasts and other hematopoietic lineages. This effect correlates with increased levels of transcripts encoding markers for the hemangioblast, including Runx1, Scl, and Gata2. Indeed, the pulse of Smad1 induction also expands the blast colony-forming cell (BL-CFC) population at a level that is fully sufficient to explain subsequent increases in hematopoiesis. Our data demonstrate that Smad1 expression is sufficient to expand the number of cells that commit to hemangioblast fate.