The hematopoietic and endothelial lineages derive from mesoderm and are thought to develop through the maturation of a common progenitor, the hemangioblast. To investigate the developmental processes that regulate mesoderm induction and specification to the hemangioblast, we generated an embryonic stem cell line with the green fluorescent protein (GFP) targeted to the mesodermal gene, brachyury. After the in vitro differentiation of these embryonic stem cells to embryoid bodies, developing mesodermal progenitors could be separated from those with neuroectoderm potential based on GFP expression. Co-expression of GFP with the receptor tyrosine kinase Flk1 revealed the emergence of three distinct cell populations, GFP(-)Flk1(-), GFP(+)Flk1(-) and GFP(+)Flk1(+) cells, which represent a developmental progression ranging from pre-mesoderm to prehemangioblast mesoderm to the hemangioblast.