Identification of multipotent cardiac progenitors has provided important insights into the mechanisms of myocardial lineage specification, yet has done little to clarify the origin of the endocardium. Despite its essential role in heart development, characterization of the endocardial lineage has been limited by the lack of specific markers of this early vascular subpopulation. To distinguish endocardium from other vasculature, we generated an NFATc1-nuc-LacZ BAC transgenic mouse line capable of labeling this specific endothelial subpopulation at the earliest stages of cardiac development. To further characterize endocardiogenesis, embryonic stem cells (ESCs) derived from NFATc1-nuc-LacZ blastocysts were utilized to demonstrate that endocardial differentiation in vitro recapitulates the close temporal-spatial relationship observed between myocardium and endocardium seen in vivo. Endocardium is specified as a cardiac cell lineage, independent from other vascular populations, responding to BMP and Wnt signals that enhance cardiomyocyte differentiation. Furthermore, a population of Flk1+ cardiovascular progenitors, distinct from hemangioblast precursors, represents a mesodermal precursor of the endocardial endothelium, as well as other cardiovascular lineages. Taken together, these studies emphasize that the endocardium is a unique cardiac lineage and provides further evidence that endocardium and myocardium are derived from a common precursor.