Embryonic stem cell-derived embryoid bodies contain a unique precursor population which, in response to vascular endothelial growth factor, gives rise to blast colonies in semi-solid medium. Upon transfer to liquid culture with appropriate cytokines, these blast colonies generate both hematopoietic and adherent, stromal-type cells. Cells within the adherent population display characteristics of endothelial lineage including the expression of CD31, flk-1, flt-1, tie-2, the capacity to take up acetylated LDL and the presence of cytoplasmic Weibel-Palade bodies. Mixing studies demonstrated that the hematopoietic and endothelial precursors within the blast colonies develop from the same cell, the blast colony-forming cell. Kinetic analysis showed that the blast colony-forming cell represents a transient cell population that develops early and is lost quickly during embryoid body development. These findings provide strong evidence that the blast colony-forming cell represents the long-hypothesized hemangioblast, the common precursor of the hematopoietic and endothelial lineages.