Hematopoietic and endothelial cells develop from a common progenitor, the hemangioblast, or directly from mesodermal cells. The molecular pathway that regulates the specification of both cell lineages remains elusive. Here, we show that a lysocardiolipin acyltransferase, lycat, is critical for the establishment of both hematopoietic and endothelial lineages. We isolated lycat from the deletion interval of cloche, a zebrafish mutant that has dramatically reduced hematopoietic and endothelial cell lineages. Reduction of lycat mRNA levels in wild-type zebrafish embryos decreases both endothelial and hematopoietic lineages. lycat mRNA rescues blood lineages in zebrafish cloche mutant embryos. E165R and G166L mutations in the highly conserved catalytic domain in Lycat abolish its function in zebrafish hematopoiesis. Epistasis analysis supports that lycahematopoietic lineages. lycat mRNA rescues blood lineages in zebrafish cloche mutant embryos. E165R and G166L mutations in the highly conserved catalt acts upstream of scl and etsrp in zebrafish hemangioblast development. These data indicate that lycat is the earliest known player in the generation of both endothelial and hematopoietic lineages.