Our understanding of how mesodermal tissue is formed has been limited by the absence of specific and reliable markers of early mesoderm commitment. We report that mesoderm commitment from human embryonic stem cells (hESCs) is initiated by epithelial-to-mesenchymal transition (EMT) as shown by gene expression profiling and by reciprocal changes in expression of the cell surface proteins, EpCAM/CD326 and NCAM/CD56. Molecular and functional assays reveal that the earliest CD326-CD56+ cells, generated from hESCs in the presence of activin A, BMP4, VEGF, and FGF2, represent a multipotent mesoderm-committed progenitor population. CD326-CD56+ progenitors are unique in their ability to generate all mesodermal lineages including hematopoietic, endothelial, mesenchymal (bone, cartilage, fat, fibroblast), smooth muscle, and cardiomyocytes, while lacking the pluripotency of hESCs. CD326-CD56+ cells are the precursors of previously reported, more lineage-restricted mesodermal progenitors. These findings present a unique approach to study how germ layer specification is regulated and offer a promising target for tissue engineering.