The close relationship between endothelial and hematopoietic precursors during early development of the vascular system suggested the possibility of a common yet elusive precursor for both cell types. Whether similar or related progenitors for endothelial and hematopoietic cells are present during organogenesis is unclear. Using inducible transgenic mice that specifically label endothelial and hematopoietic precursors, we performed fate-tracing studies combined with colony-forming assays and crosstransplantation studies. We identified a progenitor, marked by the expression of helix-loop-helix transcription factor stem cell leukemia (SCL/Tal1). During organogenesis of the kidney, SCL/Tal1 + progenitors gave rise to endothelium and blood precursors with multipotential colony-forming capacity. Furthermore, appropriate morphogenesis of the kidney vasculature, including glomerular capillary development, arterial mural cell coating, and lymphatic vessel development, required sphingosine 1-phosphate (S1P) signaling via the G protein-coupled S1P receptor 1 in these progenitors. Overall, these results show that SCL/Tal1 + progenitors with hemogenic capacity originate and differentiate within the early embryonic kidney by hemovasculogenesis (the concomitant formation of blood and vessels) and underscore the importance of the S1P pathway in vascular development.