Blood and endothelium arise in close association during development, possibly from a common precursor, the hemangioblast [1-4]. Genes essential for blood and endothelial development contain functional ETS binding sites, and binding and expression data implicate the transcription factor, friend leukaemia integration 1 (Fli1) [5-10]. However, loss-of-function phenotypes in mice, although suffering both blood and endothelial defects, have thus far precluded the conclusion that Fli1 is essential for these two lineages [11, 12]. By using Xenopus and zebrafish embryos, we show that loss of Fli1 function results in a substantial reduction or absence of hemangioblasts, revealing an absolute requirement. TUNEL assays show that the cells are eventually lost by apoptosis, but only after the regulatory circuit has been disrupted by loss of Fli1. In addition, a constitutively active form of Fli1 is sufficient to induce expression of key hemangioblast genes, such as Scl/Tal1, Lmo2, Gata2, Etsrp, and Flk1. Epistasis assays show that Fli1 expression is induced by Bmp signaling or Cloche, depending on the hemangioblast population, and in both cases Fli1 acts upstream of Gata2, Scl, Lmo2, and Etsrp. Taken together, these results place Fli1 at the top of the transcriptional regulatory hierarchy for hemangioblast specification in vertebrate embryos.