The aryl hydrocarbon receptor (AHR) plays an important physiological role in hematopoiesis. AHR is highly expressed in hematopoietic stem and progenitor cells (HSPCs) and inhibition of AHR results in a marked expansion of human umbilical cord blood-derived HSPCs following cytokine stimulation. It is unknown whether AHR also contributes earlier in human hematopoietic development. To model hematopoiesis, human embryonic stem cells (hESCs) were allowed to differentiate in defined conditions in the presence of the AHR antagonist StemReginin-1 (SR-1) or the AHR agonist 2,3,7,8-tetrachlorodibenzo-p-dioxin (TCDD). We demonstrate a significant increase in CD34+CD31+ hematoendothelial cells in SR-1-treated hESCs, as well as a twofold expansion of CD34+CD45+ hematopoietic progenitor cells. Hematopoietic progenitor cells were also significantly increased by SR-1 as quantified by standard hematopoietic colony-forming assays. Using a clustered regularly interspaced short palindromic repeats (CRISPR)/CRISPR-associated protein 9 (Cas9)-engineered hESC-RUNX1ctdTomato reporter cell line with AHR deletion, we further demonstrate a marked enhancement of hematopoietic differentiation relative to wild-type hESCs. We also evaluated whether AHR antagonism could promote innate lymphoid cell differentiation from hESCs. SR-1 increased conventional natural killer (cNK) cell differentiation, whereas TCDD treatment blocked cNK development and supported group 3 innate lymphoid cell (ILC3) differentiation. Collectively, these results demonstrate that AHR regulates early human hematolymphoid cell development and may be targeted to enhance production of specific cell populations derived from human pluripotent stem cells.