A fusion gene between Escherichia coli lacZ and herpes simplex virus thymidine kinase (HSV-tk) was constructed and used in a gene trap screen for hematopoietic loci in mouse embryonic stem (ES) cells. This gene, galtek, allowed both convenient histochemical detection of expression as well as ablation of expressing cells under 1-(2-deoxy-2-fluoro-beta-D-arabinofuranosyl)-5-iodouracil (FIAU) selection. Individual ES cell clones bearing gene trap insertions were differentiated in the presence of FIAU and scored for erythropoietic activity at day 9 of differentiation. Screening of a total of 235 independent gene trap lines identified one clone, F3, which consistently demonstrated FIAU-sensitive erythropoiesis during in vitro differentiation. Cloning of endogenous transcribed sequences from the F3 insertion site identified two distinct transcription units, F3-1 and F3-2, encoding mRNAs of approximately 1.3 kb and 3.35 kb, respectively. The transcripts were unrelated and did not exhibit similarity to known sequences. Both loci demonstrated similar relative levels of expression in the heart, testis, kidney, and lung as assessed by Northern blot hybridization. Whole-mount in situ hybridization detected F3-2 expression at multiple sites in embryonic day (E) 10.5 embryos, including the genital ridges, the aortic endothelium, and endothelium-associated cell clusters within the aortic lumen. Expression of F3-2 in the aortic endothelium and endothelium-associated clusters overlapped that of gata-2, a gene required for hematopoietic development. The FIAU sensitivity of hematopoiesis in F3 embryoid bodies may result from expression of galtek during the formation of early hematopoietic cells, directed by regulatory signals from one or both of these endogenous loci.