Hematopoietic differentiation of human pluripotent stem cells (hPSCs) requires orchestration of dynamic cell and gene regulatory networks but often generates blood cells that lack natural function. Here, we performed extensive single-cell transcriptomic analyses to map fate choices and gene expression patterns during hematopoietic differentiation of hPSCs and showed that oxidative metabolism was dysregulated during in vitro directed differentiation. Applying hypoxic conditions at the stage of endothelial-to-hematopoietic transition in vitro effectively promoted the development of arterial specification programs that governed the generation of hematopoietic progenitor cells (HPCs) with functional T cell potential. Following engineered expression of the anti-CD19 chimeric antigen receptor, the T cells generated from arterial endothelium-primed HPCs inhibited tumor growth both in vitro and in vivo. Collectively, our study provides benchmark datasets as a resource to further understand the origins of human hematopoiesis and represents an advance in guiding in vitro generation of functional T cells for clinical applications.