LMO2 is a bridging factor within a DNA binding complex and is required for definitive haematopoiesis to occur. The developmental stage of the block in haematopoietic specification is not known. We show that Lmo2-/- mouse embryonic stem cells differentiated to Flk-1+ haemangioblasts, but less efficiently to haemogenic endothelium, which only produced primitive haematopoietic progenitors. Genome-wide approaches indicated that LMO2 is required at the haemangioblast stage to position the TAL1/LMO2/LDB1 complex to regulatory elements that are important for the establishment of the haematopoietic developmental program. In the absence of LMO2, the target site recognition of TAL1 is impaired. The lack of LMO2 resulted in altered gene expression levels already at the haemangioblast stage, with transcription factor genes accounting for ∼15% of affected genes. Comparison of Lmo2-/- with Tal1-/- Flk-1+ cells further showed that TAL1 was required to initiate or sustain Lmo2 expression.