In vertebrates, the earliest differentiated cell types (hematopoietic and endothelial) arise from mesoderm induced during the process of gastrulation. These cells become organized into the blood islands of the extraembryonic yolk sac and are morphologically apparent by around d 7.5 in the mouse. Additional waves of hematopoietic and vasculogenic/angiogenic activity later result in the development of definitive hematopoietic lineages and in the formation of the allantois and cardiovascular system of the embryo proper. In part because of the limited accessibility of the mammalian embryo to experimental manipulation in vivo, regulation of these events is still not well understood. Both in the yolk sac and within the embryo proper, prospective hematovascular mesoderm differentiates in the vicinity of endodermal tissues. Here we describe an embryonic explant culture system that permits the dissection of mesodermal and endodermal contributions to hematopoietic and endothelial cell formation during gastrulation. This system can be used to assay for soluble or endodermal cell-associated molecules involved in mediating critical interactions between mesoderm and endoderm in the formation of the hematopoietic and endothelial lineages during embryonic development.