During development, hematopoiesis initiates in the yolk sac through a process that depends on VEGF/Flk1 signaling and on the function of the SCL/Tal1 transcription factor. Here we show that VEGF modifies the developmental potential of primitive erythroid progenitors and prolongs their life span. Furthermore, the survival of yolk sac erythrocytes in vivo depends on the dose of VEGF. Interestingly, in Vegf(lo/lo) embryos carrying a hypomorph allele, Flk1-positive cells reach the yolk sac at E8.5, but are severely compromised in their ability to generate primitive erythroid precursors. These observations indicate that during embryonic development, different thresholds of VEGF are required for the migration and clonal expansion of hematopoietic precursors. The near absence of primitive erythroid precursors in Vegf(lo/lo) embryos correlates with low levels of Scl in the yolk sac. Strikingly, gain-of-function of SCL partially complements the hematopoietic defect caused by the hypomorph Vegf(lo) allele, and re-establishes the survival of erythroid cells and the expression of erythroid genes (Gata1 and betaH1). This indicates that SCL functions downstream of VEGF to ensure an expansion of the hematopoietic compartment.