The first site exhibiting hematopoietic activity in mammalian development is the yolk-sac blood island, which originates from the hemangioblast. Here we performed differentiation assays, as well as genome-wide molecular and functional studies in blast colony-forming cells to gain insight into the function of the essential Ldb1 factor in early primitive hematopoietic development. We show that the previously reported lack of yolk-sac hematopoiesis and vascular development in Ldb1(-/-) mouse result from a decreased number of hemangioblasts and a block in their ability to differentiate into erythroid and endothelial progenitor cells. Transcriptome analysis and correlation with the genome-wide binding pattern of Ldb1 in hemangioblasts revealed a number of direct-target genes and pathways misregulated in the absence of Ldb1. The regulation of essential developmental factors by Ldb1 defines it as an upstream transcriptional regulator of hematopoietic/endothelial development. We show the complex interplay that exists between transcription factors and signaling pathways during the very early stages of hematopoietic/endothelial development and the specific signaling occurring in hemangioblasts in contrast to more advanced hematopoietic developmental stages. Finally, by revealing novel genes and pathways not previously associated with early development, our study provides novel candidate targets to manipulate the differentiation of hematopoietic and/or endothelial cells.