The mesoderm, which is specified during gastrulation, generates diverse cell lineages such as endothelial, blood and muscle cells. However, the transcriptional network that orchestrates this process is largely unknown. FOXF1, a forkhead box transcription factor expressed in the extra-embryonic and lateral plate mesoderm, is known to be essential for specifying mesoderm cells to a cardiovascular fate but how it functions is unclear. Here, Valerie Kouskoff and colleagues (p. 3307) generated embryonic stem cells (ESCs) and transgenic mouse lines carrying a Foxf1-venus knock-in allele to study the expression of FOXF1 and its contribution to early mesoderm specification. During ESC commitment to a mesodermal fate, FOXF1 is first expressed after FLK1, a protein essential for endothelial and hematopoietic specification. In the embryo, FOXF1 is highly expressed in all extra-embryonic mesodermal derivatives with the notable exception of the blood islands, the source of blood cells, and increased FOXF1 expression levels correlate with decreased hematopoietic potential. Indeed, using an inducible FOXF1 ESC line, the authors show that FOXF1 is sufficient to irreversibly impair the hematopoietic potential of mesodermal precursors while maintaining their endothelial potential and enhancing smooth muscle fate. These findings shed light on the molecular mechanisms governing hematopoietic specification and are likely to facilitate the derivation of specific lineages from ESCs in vitro for therapeutic applications.