Analysis of cis-regulatory elements is central to understanding the genomic program for development. The scl/tal-1 transcription factor is essential for lineage commitment to blood cell formation and previous studies identified an scl enhancer (the +18/19 element) which was sufficient to target the vast majority of hematopoietic stem cells, together with hematopoietic progenitors and endothelium. Moreover, expression of scl under control of the +18/19 enhancer rescued blood progenitor formation in scl(-/-) embryos. However, here we demonstrate by using a knockout approach that, within the endogenous scl locus, the + 18/19 enhancer is not necessary for the initiation of set transcription or for the formation of hematopoietic cells. These results led to the identification of a bifunctional 5' enhancer (-3.8 element), which targets expression to hematopoietic progenitors and endothelium, contains conserved critical Ets sites, and is bound by Ets family transcription factors, including Fli-1 and Elf-1. These data demonstrate that two geographically distinct but functionally related enhancers regulate scl transcription in hematopoietic progenitors and endothelial cells and suggest that enhancers with dual hematopoietic-endothelial activity may represent a general strategy for regulating blood and endothelial development.