Etv2 (Ets Variant 2) has been shown to be an indispensable gene for the development of hematopoietic cells (HPCs)/endothelial cells (ECs). However, how Etv2 specifies the mesoderm-generating HPCs/ECs remains incompletely understood. In embryonic stem cell (ESC) differentiation culture and Etv2-null embryos, we show that Etv2 is dispensable for generating primitive Flk-1⁺/PDGFRα⁺ mesoderm but is required for the progression of Flk-1⁺/PDGFRα⁺ cells into vascular/hematopoietic mesoderm. Etv2-null ESCs and embryonic cells were arrested as Flk-1⁺/PDGFRα⁺ and failed to generate Flk-1⁺/PDGFRα⁻ mesoderm. Flk-1⁺/Etv2⁺ early embryonic cells showed significantly higher hemato-endothelial potential than the Flk-1⁺/Etv2⁻ population, suggesting that Etv2 specifies a hemato-endothelial subset of Flk-1⁺ mesoderm. Critical hemato-endothelial genes were severely down-regulated in Etv2-null Flk-1⁺ cells. Among those genes Scl, Fli1, and GATA2 were expressed simultaneously with Etv2 in early embryos and seemed to be critical targets. Etv2 reexpression in Etv2-null cells restored the development of CD41⁺, CD45⁺, and VE-cadherin⁺ cells. Expression of Scl or Fli1 alone could also restore HPCs/ECs in the Etv2-null background, indicating that these 2 genes are critical downstream targets. Furthermore, VEGF induced Etv2 potently and rapidly in Flk-1⁺ mesoderm. We propose that Flk-1⁺/PDGFRα⁺ primitive mesoderm is committed into Flk-1⁺/PDGFRα⁻ vascular mesoderm through Etv2 and that up-regulation of Etv2 by VEGF promotes this commitment.