The fully formed heart is composed of diverse cell lineages including myocytes, endothelial cells, vascular smooth muscle cells, and fibroblasts that derive from distinct subsets of mesoderm during embryonic development. Findings from lineage tracing studies indicate that cardiomyocytes develop from cells that express fetal liver kinase-1, suggesting that the cardiac lineages may arise from a progenitor cell with vascular cardiomyocyte potential. Recent studies using the embryonic stem cell model have led to the identification of a fetal liver kinase-1(+) progenitor cell that displays both vascular and cardiomyocyte potential. A comparable progenitor was also isolated from the early mouse embryo. Identification and isolation of these cardiovascular progenitor cells establishes a new model of heart development that will provide insights into the mechanisms regulating cardiovascular lineage diversification. These progenitor cells may also represent a novel cell population for models of congenital heart disease and cell replacement therapy.