Polycomb repressive complex 2 (PRC2), a H3K27me3 methyltransferase complex, promotes the development of many organs by silencing ectopic transcription program. However, currently little is known about the role of PRC2 in blood and vascular development. In this study, we interrogated the function of embryonic ectoderm development (EED), a core PRC2 component, in both endothelial and hematopoietic tissues by inactivating a floxed murine EED allele with Tie2Cre, which catalyzes recombination in endothelial and hematopoietic lineages. Murine EEDfl/fl;Tie2Cre (EEDCKO) embryos died at embryonic day (E) 13.5. We did not observe structural abnormalities of blood vessels or cardiac valves, suggesting that EED is dispensable in endothelial cells for initial steps of vascular development. EEDCKO embryos were pale and had abnormal livers. Flow cytometry of fetal liver cells showed that EED depletion significantly impeded erythroid maturation. There was a corresponding increase in myeloid progenitors and granulocytes and macrophages, suggesting an attenuated differentiation path in myeloid lineages. Moreover, EED depletion impaired the generation of hematopoietic stem cells. Collectively, our study demonstrates that within Tie2Cre-recombined embryonic cells, EED is required for proper erythropoiesis and for formation of hematopoietic progenitor and stem cells, but is dispensable for endothelial lineage commitment and early vascular patterning.