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The ability to study hematopoietic stem cell (HSC) genesis during embryonic development has been limited by the rarity of HSC precursors in the early embryo and the lack of assays that functionally identify the long-term multilineage engraftment potential of individual putative HSC precursors. Here, we describe methodology that enables the isolation and characterization of functionally validated HSC precursors at the single cell level. First, we utilize index sorting to catalog the precise phenotypic parameter of each individually sorted cell, using a combination of phenotypic markers to enrich for HSC precursors with additional markers for experimental analysis. Second, each index-sorted cell is co-cultured with vascular niche stroma from the aorta-gonad-mesonephros (AGM) region, which supports the maturation of non-engrafting HSC precursors to functional HSC with multilineage, long-term engraftment potential in transplantation assays. This methodology enables correlation of phenotypic properties of clonal hemogenic precursors with their functional engraftment potential or other properties such as transcriptional profile, providing a means for the detailed analysis of HSC precursor development at the single cell level.