Despite decades of research, the identity of the cells generating the first haematopoietic cells in mammalian embryos is unknown. Indeed, whether blood cells arise from mesodermal cells, mesenchymal progenitors, bipotent endothelial–haematopoietic precursors or haemogenic endothelial cells remains controversial^,,,,,,,. Proximity of endothelial and blood cells at sites of embryonic haematopoiesis, as well as their similar gene expression, led to the hypothesis of the endothelium generating blood. However, owing to lacking technology it has been impossible to observe blood cell emergence continuously at the single-cell level, and the postulated existence of haemogenic endothelial cells remains disputed. Here, using new imaging and cell-tracking methods, we show that embryonic endothelial cells can be haemogenic. By continuous long-term single-cell observation of mouse mesodermal cells generating endothelial cell and blood colonies, it was possible to detect haemogenic endothelial cells giving rise to blood cells. Living endothelial and haematopoietic cells were identified by simultaneous detection of morphology and multiple molecular and functional markers. Detachment of nascent blood cells from endothelium is not directly linked to asymmetric cell division, and haemogenic endothelial cells are specified from cells already expressing endothelial markers. These results improve our understanding of the developmental origin of mammalian blood and the potential generation of haematopoietic stem cells from embryonic stem cells.