We here report that OVOL2, a C2H2 zinc finger protein, is a novel binding protein of ER71 which is a critical transcription factor for blood and vessel development. OVOL2 directly interacted with ER71, but not with ETS1 or ETS2, in the nucleus. ER71-mediated activation of the Flk1 promoter was further enhanced by OVOL2, although OVOL2 alone failed to activate it. Consistently, co-expression of ER71 and OVOL2 in differentiating embryonic stem cells (ESCs) led to a significant augmentation of FLK1(+), endothelial and hematopoietic cells. Such cooperative effects were impaired by the shRNA-mediated inhibition of Ovol2. Collectively, we show that ER71 directly interacts with OVOL2 and that such interaction is critical for FLK1(+) cell generation and their differentiation into downstream cell lineages.