Hematopoietic development during embryogenesis involves the interaction of extrinsic signaling pathways coupled to an intrinsic cell fate that is regulated by cell-specific transcription factors. Retinoic acid (RA) has been linked to stem cell self-renewal in adults and also participates in yolk sac blood island formation. Here, we demonstrate that RA decreases gata1 expression and blocks primitive hematopoiesis in zebrafish (Danio rerio) embryos, while increasing expression of the vascular marker, fli1. Treatment with an inhibitor of RA biosynthesis or a retinoic acid receptor antagonist increases gata1(+) erythroid progenitors in the posterior mesoderm of wild-type embryos and anemic cdx4(-/-) mutants, indicating a link between the cdx-hox signaling pathway and RA. Overexpression of scl, a DNA binding protein necessary for hematopoietic development, rescues the block of hematopoiesis induced by RA. We show that these effects of RA and RA pathway inhibitors are conserved during primitive hematopoiesis in murine yolk sac explant cultures and embryonic stem cell assays. Taken together, these data indicate that RA inhibits the commitment of mesodermal cells to hematopoietic fates, functioning downstream of cdx4 and upstream of scl. Our studies establish a new connection between RA and scl during development that may participate in stem cell self-renewal and hematopoietic differentiation.