Recent characterization of hemangioblasts differentiated from human embryonic stem cells (hESC) has further confirmed evidence from murine, zebrafish and avian experimental systems that hematopoietic and endothelial lineages arise from a common progenitor. Such progenitors may provide a valuable resource for delineating the initial developmental steps of human hemato-endotheliogenesis, which is a process normally difficult to study due to the very limited accessibility of early human embryonic/fetal tissues. Moreover, efficient hemangioblast and hematopoietic stem cell (HSC) generation from patient-specific pluripotent stem cells has enormous potential for regenerative medicine, since it could lead to strategies for treating a multitude of hematologic and vascular disorders. However, significant scientific challenges remain in achieving these goals, and the generation of transplantable hemangioblasts and HSC derived from hESC currently remains elusive. Our previous work has suggested that the failure to derive engraftable HSC from hESC is due to the fact that current methodologies for differentiating hESC produce hematopoietic progenitors developmentally similar to those found in the human yolk sac, and are therefore too immature to provide adult-type hematopoietic reconstitution. Herein, we outline the nature of this challenge and propose targeted strategies for generating engraftable human pluripotent stem cell-derived HSC from primitive hemangioblasts using a developmental approach. We also focus on methods by which reprogrammed somatic cells could be used to derive autologous pluripotent stem cells, which in turn could provide unlimited sources of patient-specific hemangioblasts and HSC.