Hematopoietic stem cells arise from mesoderm-derived hemogenic endothelium (HE) during embryogenesis in a process termed endothelial-hematopoietic transition (EHT). To better understand the gene networks that control this process, we investigated the role of the transcription factor HEB (TCF12) by disrupting the TCF12 gene locus in human embryonic stem cells (hESCs) and inducing them to differentiate toward hematopoietic outcomes. HEB-deficient hESCs retained key features of pluripotency, including expression of SOX2 and SSEA-4 and teratoma formation, while NANOG expression was reduced. Differentiation of HEB−/− hESCs toward hematopoietic fates revealed a severe defect in mesodermal development accompanied by decreased expression of regulators of mesoendodermal fate choices. We also identified independent defects in HE formation at the molecular and cellular levels, as well as a failure of T cell development. All defects were largely rescued by re-expression of HEB. Taken together, our results identify HEB as a critical regulator of human mesodermal and hematopoietic specification.