Elucidating the mechanisms underlying hematopoietic stem cell (HSC) specification and expansion in the embryo has been hampered by the lack of analytical cell culture systems that recapitulate in vivo development. Here, we describe an ex vivo model that facilitates a rapid and robust emergence of multipotent long-term repopulating HSCs in the embryonic AGM region. Because this method includes a cell dissociation step prior to reconstruction of a three-dimensional functional tissue and preserves both stromal and hematopoietic elements, it allowed us to identify the direct ancestry of the rapidly expanding HSC pool. We demonstrate that extensive generation of definitive HSCs in the AGM occurs predominantly through the acquisition of stem characteristics by the VE-cadherin+CD45+ population.