In this report, we describe the identification and characterization of an early embryoid body-derived colony, termed the transitional colony, which contains cell populations undergoing the commitment of mesoderm to the hematopoietic and endothelial lineages. Analysis of individual transitional colonies indicated that they express Brachyury as well as flk-1, SCL/tal-1, GATA-1, (beta)H1 and (beta)major reflecting the combination of mesodermal, hematopoietic and endothelial populations. This pattern differs from that found in the previously described hemangioblast-derived blast cell colonies in that they typically lacked Brachyury expression, consistent with their post-mesodermal stage of development (Kennedy, M., Firpo, M., Choi, K., Wall, C., Robertson, S., Kabrun, N. and Keller, G. (1997) Nature 386, 488-493). Replating studies demonstrated that transitional colonies contain low numbers of primitive erythroid precursors as well as a subset of precursors associated with early stage definitive hematopoiesis. Blast cell colonies contain higher numbers and a broader spectrum of definitive precursors than found in the transitional colonies. ES cells homozygous null for the SCL/tal-1 gene, a transcription factor known to be essential for development of the primitive and definitive hematopoietic systems, were not able to form blast colonies but did form transitional colonies. Together these findings suggest that the transitional colony represents a stage of development earlier than the blast cell colony and one that uniquely defines the requirement for a functional SCL/tal-1 gene for the progression to hematopoietic commitment.