Induced pluripotent stem (iPS) cells, reprogrammed somatic cells with embryonic stem (ES) cell-like characteristics, are generated by the introduction of combinations of specific transcription factors. Little is known about the differentiation of iPS cells in vitro. Here we demonstrate that murine iPS cells produce various hematopoietic cell lineages when incubated on a layer of OP9 stromal cells. During this differentiation, iPS cells went through an intermediate stage consisting of progenitor cells that were positive for the early mesodermal marker Flk-1 and for the sequential expression of other genes that are associated with hematopoietic and endothelial development. Flk-1(+) cells differentiated into primitive and definitive hematopoietic cells, as well as into endothelial cells. Furthermore, Flk-1(+) populations contained common bilineage progenitors that could generate both hematopoietic and endothelial lineages from single cells. Our results demonstrate that iPS cell-derived cells, like ES cells, can follow a similar hematopoietic route to that seen in normal embryogenesis. This finding highlights the potential use of iPS cells in clinical areas such as regenerative medicine, disease investigation, and drug screening.