In the developing embryo, the initial hematopoietic and vascular structure can be identified as the blood islands of the yolk sac. Blood islands are formed from mesodermal aggregates that have migrated from the primitive streak. The outer cells differentiate into endothelial cells and the inner to primitive blood. The close developmental association between hematopoietic and endothelial cell lineages has led to a hypothesis that they share a common progenitor, the hemangioblast. This review will examine emerging studies supporting the existence of such cells in order to further understand how the hematopoietic and vascular systems are established during mouse development.