The origin of hematopoietic stem cells (HSCs) and their growth factor requirement are poorly understood. Here we describe a new in vitro culture system of the aorta-gonad-mesonephros (AGM) region, where long-term repopulating HSCs first arise. We demonstrate that oncostatin M (OSM) is expressed in the AGM and is absolutely required for the expansion of multipotential hematopoietic progenitors in vitro. In addition, OSM enhances the formation of endothelial cell clusters. Thus, OSM appears to be a key cytokine for the development of multipotential hematopoietic progenitors in the AGM, possibly acting on common precursor cells between HSCs and endothelial cells. By using the AGM culture derived from macrophage colony-stimulating factor (M-CSF)-deficient op/op mutant embryos, we also show a pivotal role for M-CSF in fetal myelopoiesis.