Targeted gene disruption experiments in the mouse have demonstrated an absolute requirement for several transcription factors for the development of hematopoietic progenitors during embryogenesis. Disruption of the basic helix-loop-helix gene SCL (stem cell leukemia) causes a block early in the hematopoietic program with defects in all hematopoietic lineages. To understand how SCL participates in the organogenesis of blood, we have isolated cDNAs encoding Xenopus SCL and characterized the function of SCL during embryogenesis. We demonstrate that SCL is expressed in ventral mesoderm early in embryogenesis. SCL expression is induced by BMP-4, and a dominant negative BMP-4 receptor inhibits SCL expression in the ventral region of the embryo. Expression of SCL in either bFGF-treated animal pole explants or dorsal marginal zone explants leads to the expression of globin protein. Furthermore, over-expression of SCL does not alter normal dorsal-ventral patterning in the embryo, indicating that SCL acts to specify mesoderm to a hematopoietic fate after inductive and patterning events have occurred. We propose that SCL is both necessary and sufficient to specify hematopoietic mesoderm, and that it has a similar role in specifying hematopoietic cell fate as MyoD has in specifying muscle cell fate.