During vertebrate development, haematopoietic and endothelial cells emerge from a common mesodermal progenitor, the haemangioblast. Upon haematopoietic commitment, the haemangioblast generates blood precursors through populations of endothelial cells with haemogenic properties, but what regulates the generation of haemogenic endothelium? Here (p. 1587), Valerie Kouskoff and colleagues use mouse embryonic stem cells to investigate the role of the transcription factor SOX7 in haemangioblast differentiation. The researchers report that, within blast colonies (which recapitulate early haematopoietic development in vitro), SOX7 is expressed in haemogenic endothelium cells and is downregulated in nascent blood precursors. Enforced expression of Sox7 in blast colonies, they report, blocks haematopoietic differentiation and sustains the expression of endothelial markers. They also show that SOX7 binds and activates the promoter of VE-cadherin, an adhesion molecule that is expressed in haemogenic endothelial cells but downregulated during blood cell formation. Together, these results identify SOX7 as a transcriptional regulator of genes expressed in the haemogenic endothelium and provide new insights into early embryonic haematopoiesis.