The evolutionarily conserved aryl hydrocarbon receptor (AhR) has been studied for its role in environmental chemical-induced toxicity. However, recent studies have demonstrated that the AhR may regulate the hematopoietic and immune systems during development in a cell-specific manner. These results, together with the absence of an in vitro model system enabling production of large numbers of primary human hematopoietic progenitor cells (HPs) capable of differentiating into megakaryocyte- and erythroid-lineage cells, motivated us to determine if AhR modulation could facilitate both progenitor cell expansion and megakaryocyte and erythroid cell differentiation. Using a novel, pluripotent stem cell-based, chemically-defined, serum and feeder cell-free culture system, we show that the AhR is expressed in HPs and that, remarkably, AhR activation drives an unprecedented expansion of HPs, megakaryocyte-lineage cells, and erythroid-lineage cells. Further AhR modulation within rapidly expanding progenitor cell populations directs cell fate, with chronic AhR agonism permissive to erythroid differentiation and acute antagonism favoring megakaryocyte specification. These results highlight the development of a new Good Manufacturing Practice-compliant platform for generating virtually unlimited numbers of human HPs with which to scrutinize red blood cell and platelet development, including the assessment of the role of the AhR critical cell fate decisions during hematopoiesis.