Hematopoiesis is controlled by multiple signaling molecules during embryonic and postnatal development. The function of the fibroblast growth factor (FGF) pathway in this process is unclear. Here we show that FGF plays a key role in the regulation of primitive hematopoiesis in chicks. Using hemoglobin mRNA expression as a sensitive marker, we demonstrate that timing of blood differentiation can be separated from that of initial mesoderm patterning and subsequent migration. High FGF activity inhibits primitive blood differentiation and promotes endothelial cell fate. Conversely, inhibition of FGFR activity leads to ectopic blood formation and down-regulation of endothelial markers. Expression and functional analyses indicate that FGFR2 is the key receptor mediating these effects. The FGF pathway regulates primitive hematopoiesis by modulating Gata1 expression level and activity. We propose that the FGF pathway mediates repression of globin gene expression and that its removal is essential before terminal differentiation can occur.