Little is known about the molecular mechanisms controlling primitive hematopoietic stem cells, especially during embryogenesis. Homeobox genes encode a family of transcription factors that have gained increasing attention as master regulators of developmental processes and recently have been implicated in the differentiation and proliferation of hematopoietic cells. Several Hox homeobox genes are now known to be differentially expressed in various subpopulations of human hematopoietic cells and one such gene, HOXB4, has recently been shown to positively determine the proliferative potential of primitive murine bone marrow cells, including cells with long-term repopulating ability. To determine if this gene might influence hematopoiesis at the earliest stages of development, embryonic stem (ES) cells were genetically modified by retroviral gene transfer to overexpress HOXB4 and the effect on their in vitro differentiation was examined. HOXB4 overexpression significantly increased the number of progenitors of mixed erythroid/myeloid colonies and definitive, but not primitive, erythroid colonies derived from embryoid bodies (EBs) at various stages after induction of differentiation. There appeared to be no significant effect on the generation of granulocytic or monocytic progenitors, nor on the efficiency of EB formation or growth rate. Analysis of mRNA from EBs derived from HOXB4-transduced ES cells on different days of primary differentiation showed a significant increase in adult beta-globin expression, with no detectable effect on GATA-1 or embryonic globin (beta H-1). Thus, HOXB4 enhances the erythropoietic, and possibly more primitive, hematopoietic differentiative potential of ES cells. These results provide new evidence implicating Hox genes in the control of very early stages in the development of the hematopoietic system and highlight the utility of the ES model for gaining insights into the molecular genetic regulation of differentiation and proliferation events.