Endoglin (Eng), an accessory receptor for the transforming growth factor β (TGF-β) superfamily, is required for proper hemangioblast and primitive hematopoietic development. However the mechanism by which endoglin functions at this early developmental stage is currently unknown. Transcriptional analyses of differentiating eng-/- and eng +/+ ES cells revealed that lack of endoglin leads to profound reductions in the levels of key hematopoietic regulators, including Scl, Lmo2, and Gata2. We also detected lower levels of phosphorylated Smad1 (pSmad1), a downstream target signaling molecule associated with the TGF-β pathway. Using doxycycline-inducible ES cell lines, we interrogated the TGF-β signaling pathway by expressing activated forms of ALK-1 and ALK-5, type I receptors for TGF-β. Our results indicate that ALK-1 signaling promotes hemangioblast development and hematopoiesis, as evidenced by colony assays, gene expression and FACS analyses, whereas signaling by ALK-5 leads to the opposite effect, inhibition of hemangioblast and hematopoietic development. In Eng -/- ES cells, ALK-1 rescued both the defective hemangioblast development, and primitive erythropoiesis, indicating that ALK-1 signaling can compensate for the absence of endoglin. We propose that endoglin regulates primitive hematopoiesis by modulating the activity of the Smad1/5 signaling pathway in early stages of development.