Abstract 1277 Animal studies demonstrated that the first HSCs are generated in the aorta-gonad-mesonephros from a unique population of endothelial cells, hemogenic endothelium (HE), through endothelial-hematopoietic transition. However, the identity of HE remains obscure and the specific features that distinguish HE from non-HE and the discrete stages of endothelial transition into hematopoietic cells are not characterized. Here we employed hESC differentiation system in coculture with OP9 to define the distinct population of HE, and to develop an experimental system for analysis of endothelial-hematopoietic transition in vitro. Previously, we demonstrated that endothelial cells could be distinguished from hematopoietic progenitors based on the lack of CD43 expression (Vodyanik et al., Blood 2006;108:2095). Here, we analyzed the earliest stages of endothelial development from hESCs before the typical hematopoietic CFCs could be detected. We found that the first CD144+ endothelial cells appear on day 4 of differentiation within a population of APLNR+ cells expressing a high level of KDR. Based on expression of CD235a/CD43, CD73 and CD41a, we identified three major subsets within the emerging CD144+ cells: 1)CD235a/CD43−CD73+, 2)CD235a/CD43−CD73−, and 3)CD235a/CD43+CD41a−. Although all three subsets formed monolayer endothelial cells when grown on fibronectin in endothelial media, only CD235a/CD43+CD41a− cells displayed hematopoietic CFC potential, which required serum-free medium and were dependent on hematopoietic cytokines and FGF2. After culture with OP9, both CD144+CD235a/CD43−CD73− and CD144+CD235a/CD43+CD41a− cells generated CD31+CD43/45− endothelial cells and a significant amount of CD43+ blood cells. In contrast CD144+CD235a/CD43−CD73+ cells formed almost exclusively endothelial cells. Single cell deposition experiments demonstrated that CD144+CD235a/CD43+CD41a− cells formed predominantly hematopoietic cells, while most CD144+CD235a/CD43−CD73− cells gave rise to either hematopoietic or endothelial clusters with approximately 2.5% of cells forming hematoendothelial clusters, indicating the presence of bipotential progenitors within this population. Though all three CD144+ subsets had a very similar molecular signature and expressed typical endothelial genes and genes associated with angiohematopoietic and HSC development, CD235a/CD43+CD41a− showed the higher expression of hematopoietic genes and lower expression of CDH5, CDH2, CAV1, and APOLD1 typical endothelial genes. Based on the functional, phenotypic and molecular properties we designated the identity of subsets as follows: 1) CD144+CD235a/CD43+CD41a− angiogenic blood cells, i.e. cells that possessed primary hematopoietic characteristics but were also capable of generating endothelial cells; 2) CD144+CD235a/CD43−CD73+ endothelial progenitors, i.e. cells that had all functional and molecular features of endothelial cells and endothelial colony-forming potential on OP9; 3) CD144+CD235a/CD43−CD73− HE cells, i.e. cells with primary endothelial characteristics lacking hematopoietic CFC potential and surface markers, but capable of generating blood and endothelial cells after coculture with stromal cells. To find out the direct precursors of HE and blood cells, we analyzed the differentiation potential of major subsets of mesodermal cells isolated on day 4 of hESC coculture with OP9. We found that only APLNR+KDRbrightCD140alow/− mesodermal cells lacking expression of typical hematopoietic (CD43, CD45), endothelial (CD31, CD144), and mesenchymal (CD73, CD105) markers had the potential to generate both blood and endothelium. Moreover, single cell deposition experiments demonstrated that APLNR+KDRbrightCD140alow/− cells formed HE clusters with a high frequency (about 1/10 cells), strongly indicating that these cells represent the direct precursors of HE. Because APLNR+KDRbrightCD140alow/− cells upregulated expression LMO2, TAL1, CBFB, GATA2, and FLI1 transcriptional regulators of hematopoietic and endothelial development, but were lacking expression of primitive streak genes, we designated these cells as angioblasts. Together these studies provide a hESC-based platform for identification of factors required for acquisition of HSC potential by blood cells following transition from endothelium. Disclosures: Thomson: CDI: Consultancy, Equity Ownership, Membership on an entity's Board of Directors or advisory committees. Slukvin:CDI: Consultancy, Equity Ownership.