We elucidate the cellular and molecular kinetics of the stepwise differentiation of human embryonic stem cells (hESCs) to primitive and definitive erythromyelopoiesis from human embryoid bodies (hEBs) in serum-free clonogenic assays. Hematopoiesis initiates from CD45 hEB cells with emergence of semiadherent mesodermal-hematoendothelial (MHE) colonies that can generate endothelium and form organized, yolk sac-like structures that secondarily generate multipotent primitive hematopoietic stem progenitor cells (HSPCs), erythroblasts, and CD13(+)CD45(+) macrophages. A first wave of hematopoiesis follows MHE colony emergence and is predominated by primitive erythropoiesis characterized by a brilliant red hemoglobinization, CD71/CD325a (glycophorin A) expression, and exclusively embryonic/fetal hemoglobin expression. A second wave of definitive-type erythrold burst-forming units (BFU-e's), erythrold colony-forming units (CFU-e's), granulocyte-macrophage colony-forming cells (GM-CFCs), and multilineage CFCs follows next from hEB progenitors. These stages of hematopoiesis proceed spontaneously from hEB-derived cells without requirement for supplemental growth factors during hEB differentiation. Gene expression analysis of differentiating hEBs revealed that initiation of hematopoiesis correlated with increased levels of SCL/TAL1, GATA1, GATA2, CD34, CD31, and the homeobox gene-regulating factor CDX4 These data indicate that hematopoietic differentiation of hESCs models the earliest events of embryonic and definitive hematopoiesis in a manner resembling human yolk sac development, thus providing a valuable tool for dissecting the earliest events in human HSPC genesis.