TAL1 plays pivotal roles in vascular and hematopoietic developments through the complex with LMO2 and GATA1. Hemangioblasts, which have a differentiation potential for both endothelial and hematopoietic lineages, arise in the primitive streak and migrate into the yolk sac to form blood islands, where primitive hematopoiesis occurs. ZFAT (a zinc-finger gene in autoimmune thyroid disease susceptibility region/an immune-related transcriptional regulator containing 18 C(2)H(2)-type zinc-finger domains and one AT-hook) was originally identified as an immune-related transcriptional regulator containing 18 C(2)H(2)-type zinc-finger domains and one AT-hook, and is highly conserved among species. ZFAT is thought to be a critical transcription factor involved in immune-regulation and apoptosis; however, developmental roles for ZFAT remain unknown. Here we show that Zfat-deficient (Zfat(-/-)) mice are embryonic-lethal, with impaired differentiation of hematopoietic progenitor cells in blood islands, where ZFAT is exactly expressed. Expression levels of Tal1, Lmo2, and Gata1 in Zfat(-/-) yolk sacs are much reduced compared with those of wild-type mice, and ChIP-PCR analysis revealed that ZFAT binds promoter regions for these genes in vivo. Furthermore, profound reduction in TAL1, LMO2, and GATA1 protein expressions are observed in Zfat(-/-) blood islands. Taken together, these results suggest that ZFAT is indispensable for mouse embryonic development and functions as a critical transcription factor for primitive hematopoiesis through direct-regulation of Tal1, Lmo2, and Gata1. Elucidation of ZFAT functions in hematopoiesis might lead to a better understanding of transcriptional networks in differentiation and cellular programs of hematopoietic lineage and provide useful information for applied medicine in stem cell therapy.