Hematopoietic development is regulated in large part by transcription factors that control cell fate decisions and cellular differentiation. Several genes first discovered in the context of chromosomal translocations in leukemia also serve important functions in blood cell development. Gene-targeting experiments related to two of these factors, SCL/tal-1 and translocation-ets-leukemia (TEL), are reviewed here. SCL/tal-1, a T-cell basic helix-loop-helix oncoprotein, is required for the formation of all hematopoietic lineages. In addition, it is essential for angiogenesis in the yolk sac, indicating a dual function in blood and vessel development. TEL, an ets-related factor which is translocated to a variety of other genes in leukemias, is also required for proper angiogenesis in the yolk sac. Additional studies, however, demonstrate that TEL function is necessary for hematopoiesis to be established in the bone marrow microenvironment. These studies emphasize the intrinsic roles of leukemia-associated transcription factors in normal blood cell and vessel development.