SMAD proteins are downstream signal transducers of the transforming growth factor beta (TGF-beta) superfamily, which serve as plelotropic regulators in embryonic and adult hematopoiesis. SMAD5, initially considered to mediate bone morphogenetic proteins (BMPs) signals, can also transduce the inhibitory signal of TGF-beta1 on proliferation of hematopoietic progenitors derived from human bone marrow. To define its specific role in regulation of primitive multipotential progenitors during early embryonic hematopoiesis, we examined Smad5(-/-) yolk sacs at E9.0 to 9.5 and detected an elevated number of high-proliferative potential colony-forming cells (HPP-CFCs) with enhanced re-plating potential. To exclude the possible influence of microenvironmental deficit on embryonic hematopoiesis in vivo, we performed In vitro embryonic stem (ES) cell differentiation assay and investigated the HPP-CFCs in particular. Smad5(-/-) embryoid bodies (EBs) contained an elevated number of blast colony-forming cells (BL-CFCs), the in vitro equivalent of hemangloblast, in contrast to reduced proliferation of primitive erythroid precursors (Ery/Ps) within the mutant IEBs. More importantly, profoundly increased frequency of HPP-CFCs, featured with a gene-dosage effect, was detected within day 6 Smad5(-/-) IEBs compared Smad5(-/-) HPP-CFCs displayed enhanced self-renewal capacity and decreased sensitivity to TGF-beta1 inhibition, suggesting a critical role of Smad5 in TGF-beta1 regulation of embryonic HPP-CFCs. Consistently, reverse transcription-polymerase chain reaction analysis detected alterations of the transcription factors including GATA-2 and AMI-1 as well as cytokine receptors in Smad5(-/-) HPP-CFC colonies. Together, these data define an important function of SMAD5 in negative regulation of high-proliferative potential precursors during embryonic hematopoiesis. (C) 2003 by The American Society of Hematology.