The close spatial relationship between endothelial and hematopoietic cells at different stages of development has led to the concept of a common progenitor, the hemangioblast. The vascular endothelial growth factor receptor, Flk1 or KDR, is a common marker of all cells--whether embryonic or adult--that have putative hemangioblast properties. In this article, a model is proposed in which Flk1 marks a common mesodermal precursor that segregates successive subsets of Flk1-expressing or Flk1-nonexpressing cells whose fate is determined by coexpression of lineage-specific transcription factors. Cells that retain Flk1 activity have endothelial potential, cells that also activate downstream transcription factors such as Tal1 and Runx1 gain primitive or definitive hematopoietic activity, and cells that lose Flk1 expression but gain expression of other transcription factors become smooth muscle or other cell types.