The yolk sac is the first site of hematopoiesis during mammalian devel
opment. The yolk sac is also the first site of blood vessel developmen
t. Development of the blood islands in the yolk sac is an integrated p
rocess in which these two developmental events, hematopoiesis and vasc
ulogenesis, proceed in concert. This review focuses on mouse yolk sac
hematopoietic stem cells (YS-HSC), describing their differentiation in
vitro and in vivo. YS-HSC go through a progressive series of changes
prior to the initiation of lineage-specific differentiation. Experimen
ts tracing their origins from postulated hemangioblasts, and the subse
quent interaction between these stem cells and yolk sac endothelial ce
lls are described. Differences between the extraembryonic YS-HSC and H
SC found later within the embryo, perinatally or in adults, are descri
bed, YS-HSC have greater reproductive capability than HSC obtained fro
m fetal liver, umbilical cord blood or adult bone marrow; they do not
yet express major histocompatibility complex-associated antigens and t
hey are able to reconstitute adult immunocompromised animals even,when
introduced in small numbers (<100 cells/mouse). With recent results d
emonstrating the feasibility of expanding YS-ASC in vitro as wed as of
introducing new genes into these cells by transfection, the YS-HSC sh
ows promise both as a means of achieving- long-term restitution of hem
atopoiesis across histocompatibility barriers and as a self-renewing v
ehicle for gene transfer.