Yolk sac hematopoiesis is characterized by restricted hematopoietic cell differentiation. Although multipotent hematopoietic progenitor cells have been identified in the early yolk sac, long-term multilineage repopulating (LTMR) hematopoietic stem cell (HSC) activity has not been demonstrable before day 11 postcoitus (PC) using standard transplantation assays. In the present study, day-10 PC yolk sac hematopoietic cells were infused into myeloablated congenic newborn pups and donor cell engraftment and multilineage reconstitution of peripheral blood cells for at least 11 months in primary recipients was observed. In contrast, transplantation of day-10 PC yolk sac cells into congenic adult recipients did not result in engraftment despite pretransplant conditioning of the recipients or use of recipients that were genetically deficient in stem cells. Although fresh yolk sac cells were incapable of reconstitution when injected into adult recipient mice, yolk sac donor-derived cells residing in the bone marrow of primary newborn transplant recipients were capable of efficient reconstitution of conditioned secondary recipient adult mice. Primary newborn and secondary adult recipient animals engrafted with yolk sac cells were observed to have normal peripheral blood white blood cell counts. Lymphocyte subsets in peripheral blood, thymus, and spleen were also similar to control animals. The distribution and frequency of lineage-restricted progenitors derived from bone marrow of secondary transplant recipients were normal. These results indicate that day-10 PC yolk sac HSCs are capable of engrafting and reconstituting the hematopoietic system of conditioned newborn but not adult recipient animals. Furthermore, the ability of the yolk sac HSCs to differentiate into all hematopoietic lineages in these recipients strongly suggests that the local cellular microenvironment plays a prominent role in regulating yolk sac HSC differentiation.