Much remains unknown about the signals that induce early mesoderm to initiate hematopoietic differentiation. Here, we show that endoglin (Eng), a receptor for the TGFβ superfamily, identifies all cells with hematopoietic fate in the early embryo. These arise in an Eng(+)Flk1(+) mesodermal precursor population at embryonic day 7.5 (E7.5), a cell fraction also endowed with endothelial potential. In Eng-knockout embryos, hematopoietic colony activity and numbers of CD71(+)Ter119(+) erythroid progenitors were severely reduced. This coincided with severely reduced expression of embryonic globin and key bone morphogenic protein (BMP) target genes, including the hematopoietic regulators Scl, Gata1, Gata2, and Msx-1. To interrogate molecular pathways active in the earliest hematopoietic progenitors, we applied transcriptional profiling to sorted cells from E7.5 embryos. Eng(+)Flk-1(+) progenitors coexpressed TGFβ and BMP receptors and target genes. Furthermore, Eng(+)Flk-1(+) cells presented high levels of phospho-SMAD1/5, indicating active TGFβ and/or BMP signaling. Remarkably, under hematopoietic serum-free culture conditions, hematopoietic outgrowth of Eng-expressing cells was dependent on the TGFβ superfamily ligands BMP4, BMP2, or TGF-β1. These data demonstrate that the E(+)F(+) fraction at E7.5 represents mesodermal cells competent to respond to TGFβ1, BMP4, or BMP2, shaping their hematopoietic development, and that Eng acts as a critical regulator in this process by modulating TGF/BMP signaling.