Lineage specification during development involves reprogramming of transcriptional states, but little is known about how this is regulated in vivo. We recently found that the chromatin remodeler Chd1 promotes a globally elevated transcriptional output in mouse embryonic stem cells and is essential for epiblast development. Here we report that Chd1 regulates the emergence of hematopoietic progenitors from the endothelium of embryonic blood vessels. Endothelial-specific deletion of Chd1 using Tie2-Cre leads to embryonic lethality by E15.5. Mutant embryos have apparently normal vasculature but show signs of anemia as early as E11.5, are depleted of definitive hematopoietic stem and progenitor cells, and display a complete failure of fetal liver erythropoiesis. At E10.5, mutants are morphologically indistinguishable from controls and contain normal numbers of intra-aortic hematopoietic clusters that express Runx1 and Kit. However, mutant cells fail to mature into blood lineage cells both in vivo and in vitro, and instead undergo apoptosis. Gene expression profiling of the E10.5 mutant endothelium revealed that Chd1 is required for the activation of a transcriptional sub-program associated with hematopoiesis and cellular growth. We found that emerging hematopoietic progenitors have an elevated transcriptional output relative to structural endothelium, and this elevation is suppressed in Chd1 mutants. Finally, hematopoietic-specific deletion of Chd1 using Vav-Cre yields no apparent defects during development or adulthood. These results indicate that Chd1 promotes an elevated transcriptional output that is essential during a specific developmental window in the transition of endothelial cells to definitive blood progenitors.