Histone deacetylases (HDACs) are important regulators of developmental processes and cellular functions. However, their role in hematopoiesis has not been determined, and in Xenopus laevis, a specific function for HDACs has yet to be identified. In the present work, we employed the class I selective HDAC inhibitor, valproic acid (VPA), to identify hdac3 as an essential mediator of primitive hematopoiesis. Exposure to VPA during gastrulation results in a marked and specific block of primitive hematopoiesis in Xenopus embryos. Furthermore, pharmacological and loss of function studies demonstrate that hdac3 functions downstream of bmp4 signaling and is specifically required for primitive erythropoiesis. We also describe here that runx1 is activated by bmp4 in an HDAC-dependent manner. Consistent with this, restoring runx1 expression partially rescues VPA mediated hematopoietic defects. We further identify that the effects of HDAC inhibition on primitive hematopoiesis is conserved in mammals, as yolk sac hematopoiesis in mouse is also blocked with exposure to VPA. Lastly, we identify a bicarbonate transporter as the primary means for VPA to enter the embryos. Our findings demonstrate for the first time a critical role for hdac3 in primitive hematopoiesis, and indicate that specific developmental defects associated with exposure to VPA, a significant teratogen in humans, arise through inhibition of class I HDACs.