CHROMOSOMAL translocations associated with malignancies often result in deregulated expression of genes encoding transcription factors¹. In human T-cell leukaemias such regulators belong to diverse protein families and may normally be expressed widely (for example, Ttg-1/rbtnl, Ttg-2/rbtn2) ^2,3, exclusively outside the haematopoietic system (for example, Hoxll) ⁴, or specifically in haematopoietic cells and other selected sites (for example, tal-1/ SCL, lyl-1) ^5,6. Aberrant expression within T cells is thought to interfere with programmes of normal maturation. The most frequently activated gene in acute T-cell leukaemias, tal-1 (also called SCL) ^7,8, encodes a candidate regulator of haematopoietic development⁹, a basic-helix-loop-helix protein⁵, related to critical myogenic¹⁰ and neurogenic¹¹ factors. Here we show by targeted gene disruption in mice¹² that tal-1 is essential for embryonic blood formation in vivo. With respect to embryonic erythropoiesis, tal-1 deficiency resembles loss of the erythroid transcription factor GATA-1^13,14 or the LIM protein rbtn2¹⁵ .Profound reduction in myeloid cells cultured in vivo from tal-1 null yolk sacs suggests a broader defect manifest at the myelo-erythroid or multipotential progenitor cell level.