The generation of blood cells, haematopoiesis, in the mouse embryo begins with the development of primitive nucleated erythroid cells in the yolk sac followed by the appearance of precursors for multiple definitive haematopoietic lineages. The later developing lineages arise from multipotential stem cells, but the relationship of primitive erythroid cells to these other haematopoietic populations is unknown. Using an in vitro embryonic stem (ES) cell differentiation system, we show that primitive erythrocytes and other haematopoietic lineages arise from a common multipotential precursor that develops within embryoid bodies generated from differentiated ES cells. In response to vascular endothelial growth factor and c-kit ligand these precursors give rise to colonies containing immature cells (blasts) expressing marker genes characteristic of haematopoietic precursors. Many blast colonies also expressed betaH1 and beta major globins but not Brachyury, a mesodermal marker. Kinetic analysis demonstrated that the blast colony-forming cells represent a transient population, preceding the establishment of the primitive erythroid and other lineage-restricted precursors. This precursor population may represent the earliest stage of embryonic haematopoietic commitment.