Despite a large number of investigations of embryonic vascular development, in particular in avian embryos, the conditions under which the endothelial and hematopoietic cell lineages emerge remain unknown. As we demonstrate here, both endothelial and hematopoietic cells can be induced by treatment of dissociated quail epiblast with fibroblast growth factors in vitro. These cells aggregate in characteristic blood islands. In long-term culture, the induced endothelial cells gave rise to vascular structures in vitro, i.e. vasculogenesis. No induction was observed in the absence of fibroblast growth factors, and other growth factors like TGF-beta, TGF-alpha and EGF were not capable of inducing blood island formation. Thus, the dissociated quail epiblast provides a remarkably simple test system to investigate cell lineage diversification in higher vertebrates.