Mesp1 is regarded as the master regulator of cardiovascular development, initiating the cardiac transcription factor cascade to direct the generation of cardiac mesoderm. To define the early embryonic cell population that responds to Mesp1, we performed pulse inductions of gene expression over tight temporal windows following embryonic stem cell differentiation. Remarkably, instead of promoting cardiac differentiation in the initial wave of mesoderm, Mesp1 binds to the Tal1 (Scl) +40 kb enhancer and generates Flk-1+ precursors expressing Etv2 (ER71) and Tal1 that undergo hematopoietic differentiation. The second wave of mesoderm responds to Mesp1 by differentiating into PDGFRα+ precursors that undergo cardiac differentiation. Furthermore, in the absence of serum-derived factors, Mesp1 promotes skeletal myogenic differentiation. Lineage tracing revealed that the majority of yolk sac and many adult hematopoietic cells derive from Mesp1+ precursors. Thus, Mesp1 is a context-dependent determination factor, integrating the stage of differentiation and the signaling environment to specify different lineage outcomes.