A pool of stem cells that arise from the mesoderm during embryogenesis initiates hematopoiesis. However, factors that regulate the expansion of blood stem cells are poorly understood. We show here that cytokine-induced proliferation of primitive human hematopoietic cells could be inhibited with antibodies to hedgehog (Hh). Conversely, Sonic hedgehog (Shh) treatment induced the expansion of pluripotent human hematopoietic repopulating cells detected in immunodeficient mice. Noggin, a specific inhibitor of bone morphogenetic protein 4 (BMP-4), was capable of inhibiting Shh-induced proliferation in a similar manner to anti-Hh; however, anti-Hh had no effect on BMP-4-induced proliferation. Our study shows that Shh functions as a regulator of primitive hematopoietic cells via mechanisms that are dependent on downstream BMP signals.