The SCL gene encodes a basic helix-loop-helix (bHLH) transcription factor that is essential for the development of all haematopoietic lineages. SCL is also expressed in endothelial cells, but its function is not essential for specification of endothelial progenitors and the role of SCL in endothelial development is obscure. We isolated the zebrafish SCL homologue and show that it was co-expressed in early mesoderm with markers of haematopoietic, endothelial and pronephric progenitors. Ectopic expression of SCL mRNA in zebrafish embryos resulted in overproduction of common haematopoietic and endothelial precursors, perturbation of vasculogenesis and concomitant loss of pronephric duct and somitic tissue. Notochord and neural tube formation were unaffected. These results provide the first evidence that SCL specifies formation of haemangioblasts, the proposed common precursor of blood and endothelial lineages. Our data also underline the striking similarities between the role of SCL in haematopoiesis/vasculogenesis and the function of other bHLH proteins in muscle and neural development.