During development, the hematopoietic lineage transits through hemogenic endothelium, but the signaling pathways effecting this transition are incompletely characterized. Although the Hedgehog (Hh) pathway is hypothesized to play a role in patterning blood formation, early embryonic lethality of mice lacking Hh signaling precludes such analysis. To determine a role for Hh signaling in patterning of hemogenic endothelium, we assessed the effect of altered Hh signaling in differentiating mouse ES cells, cultured mouse embryos, and developing zebrafish embryos. In differentiating mouse ES cells and mouse yolk sac cultures, addition of Indian Hh ligand increased hematopoietic progenitors, whereas chemical inhibition of Hh signaling reduced hematopoietic progenitors without affecting primitive streak mesoderm formation. In the setting of Hh inhibition, induction of either Notch signaling or overexpression of Stem cell leukemia (Scl)/T-cell acute lymphocytic leukemia protein 1 rescued hemogenic vascular-endothelial cadherin(+) cells and hematopoietic progenitor formation. Together, our results reveal that Scl overexpression is sufficient to rescue the developmental defects caused by blocking the Hh and Notch pathways, and inform our understanding of the embryonic endothelial-to-hematopoietic transition.