Cardiogenesis requires the generation of endothelial, cardiac, and smooth muscle cells, thought to arise from distinct embryonic precursors. We use genetic fate-mapping studies to document that isl1(+) precursors from the second heart field can generate each of these diverse cardiovascular cell types in vivo. Utilizing embryonic stem (ES) cells, we clonally amplified a cellular hierarchy of isl1(+) cardiovascular progenitors, which resemble the developmental precursors in the embryonic heart. The transcriptional signature of isl1(+)/Nkx2.5(+)/flk1(+) defines a multipotent cardiovascular progenitor, which can give rise to cells of all three lineages. These studies document a developmental paradigm for cardiogenesis, where muscle and endothelial lineage diversification arises from a single cell-level decision of a multipotent isl1(+) cardiovascular progenitor cell (MICP). The discovery of ES cell-derived MICPs suggests a strategy for cardiovascular tissue regeneration via their isolation, renewal, and directed differentiation into specific mature cardiac, pacemaker, smooth muscle, and endothelial cell types.