The production of red blood cells, termed erythropoiesis, occurs in two waves in the developing mouse embryo: first primitive erythropoiesis followed by definitive erythropoiesis. In the mouse embryo, both primitive and definitive erythropoiesis originates in the extra-embryonic yolk sac. The definitive wave then migrates to the fetal liver, fetal spleen and fetal bone marrow as these organs form. The fetal liver serves as the major organ for hematopoietic cell expansion and erythroid maturation after mid-gestation. The erythropoietic niche, which expresses critical cytokines such as stem cell factor (SCF), thrombopoietin (TPO) and the insulin-like growth factors IGF1 and IGF2, supports hematopoietic expansion in the fetal liver. Previously, our group demonstrated that DLK1+ hepatoblasts support fetal liver hematopoiesis through erythropoietin and SCF release as well as extracellular matrix deposition. Loss of DLK1+ hepatoblasts in Map2k4−/− mouse embryos resulted in decreased numbers of hematopoietic cells in fetal liver. Genes encoding proteinases and peptidases were found to be highly expressed in DLK1+ hepatoblasts. Capitalizing on this knowledge, and working on the assumption that these proteinases and peptidases are generating small, potentially biologically active peptides, we assessed a range of peptides for their ability to support erythropoiesis in vitro. We identified KS-13 (PCT/JP2010/067011) as an erythropoietic peptide-a peptide which enhances the production of red blood cells from progenitor cells. Here, we discuss the elements regulating embryonic erythropoiesis with special attention to niche cells, and demonstrate how this knowledge can be applied in the identification of niche-derived peptides with potential therapeutic capability.