The receptor tyrosine kinase Flk-1 (ref. 1) is believed to play a pivotal role in endothelial development. Expression of the Flk-1 receptor is restricted to endothelial cells and their embryonic precursors, and is complementary to that of its ligand, vascular endothelial growth factor (VEGF), which is an endothelial-specific mitogen. Highest levels of flk-1 expression are observed during embryonic vasculogenesis and angiogenesis, and during pathological processes associated with neovascularization, such as tumour angiogenesis. Because flk-1 expression can be detected in presumptive mesodermal yolk-sac blood-island progenitors as early as 7.0 days postcoitum, Flk-1 may mark the putative common embryonic endothelial and haematopoietic precursor, the haemangioblast, and thus may also be involved in early haematopoiesis. Here we report the generation of mice deficient in Flk-1 by disruption of the gene using homologous recombination in embryonic stem (ES) cells. Embryos homozygous for this mutation die in utero between 8.5 and 9.5 days post-coitum, as a result of an early defect in the development of haematopoietic and endothelial cells. Yolk-sac blood islands were absent at 7.5 days, organized blood vessels could not be observed in the embryo or yolk sac at any stage, and haematopoietic progenitors were severely reduced. These results indicate that Flk-1 is essential for yolk-sac blood-island formation and vasculogenesis in the mouse embryo.