Smad1 and Smad5 proteins are intracellular mediators of BMP signaling, which has been implicated in regulating hemato-vascular development. Both Smad 1 and 5 are expressed widely in the developing hematopoietic mesoderm, and mutation of either mouse gene is embryonic lethal, limiting progress in defining their function in hematopoiesis. To compare the functions of these two closely related regulatory proteins, we used specific Smad5 mutants and Smad1 morpholinos in the zebrafish model. In the Smad5 mutant, piggytail (pgy), homozygous embryos are dorsalized and live until day 3–5, but have little to no blood and no circulation. Key hematopoietic regulatory genes are expressed in the pgy/pgy mutant fish, but the pattern of expression is altered in early embryos. Gata1, Gata2, Lmo2, draculin and Scl expression patterns are expanded at the five somite stage toward the more caudal region of the mutant embryos. In contrast, the expression pattern of the general mesoderm marker ‘no tail’ is not affected by loss of Smad5. The cells in the most caudal region of the mutant embryos express Gata1 precociously, indicating that they are specified along the erythroid lineage but fail to differentiate. However, Gata1 expression is lost by 48 hpf, as demonstrated in embryos carrying a gata1:gfp transgene on the pgy/pgy background. As in the pgy embryos, injection of a Smad1 morpholino at the one-cell stage leads to a dorzalized phenotype. However, in contrast to pgy embryos, Gata1 expression is maintained in the Smad1 morphants and Gata1 positive cells are found to circulate in the morphant embryos through at least 72 hpf. Our data support an essential role for Smad5 and not Smad1 in embryonic hematopoiesis. To analyze Smad5 function in the adult hematopoietic system, we established adult pgy fish that carry the gata1:gfp transgene, for analysis of blood cell profiles using flow cytometry. Blood cell populations were monitored under normal conditions and following phenylhydrazine induced hemolytic anemia in wildtype and pgy/+ fish. The pgy/+ adult fish are able to mount an erythropoietic response to hemolytic anemia. However, pgy/+ fish at two days post-treatment accumulate 30% of their erythroid progenitor population at the polychromatophilic stage, compared to 10% in wildtype. The pgy/+ fish are thus unable to reconstitute the erythrocyte population in the kidney at a rate comparable to wildtype fish. In summary, our data indicate that Smad5 has a role in the kinetics of embryonic stage erythropoiesis, distinct from the function of Smad1, and in adult erythropoiesis specifically at the transition from the proeyrthroblast to the polychromatophilic erythroblast stage.