CHROMOSOMAL translocations associated with malignancies often result in deregulated expression of genes encoding transcription factors(1). In human T-cell leukaemias such regulators belong to diverse protein families and may normally be expressed widely (for example, Ttg-1/rbtn1, Ttg-2/rbtn2)(2’3), exclusively outside the haematopoietic system (for example, Hox11)(4), or specifically in haematopoietic cells and other selected sites (for example, tal-1/ SCL, lyl-1)(5,6). Aberrant expression within T cells is thought to interfere with programmes of normal maturation. The most frequently activated gene in acute T-cell leukaemias, tal-1 (also called SCL)(7,8), encodes a candidate regulator of haematopoietic development(9), a basic-helix-loop-helix protein(5), related to critical myogenic(10) and neurogenic(11) factors. Here we show by targeted gene disruption in mice(12) that tal-1 is essential for embryonic blood formation in vivo. With respect to embryonic erythropoiesis, tal-1 deficiency resembles loss of the erythroid transcription factor GATA-(13,14) or the LIM protein rbtn2(15). Profound reduction in myeloid cells cultured in vivo from tal-1 null yolk sacs suggests a broader defect manifest at the myelo-erythroid or multipotential progenitor cell level.