To better understand the relationship between the embryonic hematopoietic and vascular systems, we investigated the establishment of circulation in mouse embryos by examining the redistribution of yolk sac-derived primitive erythroblasts and definitive hematopoietic progenitors. Our studies revealed that small numbers of erythroblasts first enter the embryo proper at 4 to 8 somite pairs (sp) (embryonic day 8.25 [E8.25]), concomitant with the proposed onset of cardiac function. Hours later (E8.5), most red cells remained in the yolk sac. Although the number of red cells expanded rapidly in the embryo proper, a steady state of approximately 40% red cells was not reached until 26 to 30 sp (E10). Additionally, erythroblasts were unevenly distributed within the embryo's vasculature before 35 sp. These data suggest that fully functional circulation is established after E10. This timing correlated with vascular remodeling, suggesting that vessel arborization, smooth muscle recruitment, or both are required. We also examined the distribution of committed hematopoietic progenitors during early embryogenesis. Before E8.0, all progenitors were found in the yolk sac. When normalized to circulating erythroblasts, there was a significant enrichment (20- to 5-fold) of progenitors in the yolk sac compared with the embryo proper from E9.5 to E10.5. These results indicated that the yolk sac vascular network remains a site of progenitor production and preferential adhesion even as the fetal liver becomes a hematopoietic organ. We conclude that a functional vascular system develops gradually and that specialized vascular-hematopoietic environments exist after circulation becomes fully established.