Embryonal stem (ES) cells are pluripotent cell types that in chimaeric mice can give rise to all cellular lineages. Early studies showed that they also had the potential to form mature erythrocytes following in vitro differentiation. In recent years ES cells have been demonstrated to be competent both to produce all haematopoietic lineages following in vitro differentiation and long-term repopulating haematopoietic stem cells. This review discusses the approaches that have been used to produce these haematopoietic cells and the nature of the haematopoietic stem cells that can be isolated. The utility of the system to both isolate genes involved in control of haematopoiesis and to assess their function following transgenesis is demonstrated. The prospectives for this field are then discussed in the context of recent developments in human ES cells and evidence of stem cell plasticity.