The protein inhibitor of activated STAT-1 (PIAS1) is one of the few known SUMO E3 ligases. PIAS1 has been implicated in several biological processes including repression of innate immunity and DNA repair. However, PIAS1 function during development and tissue differentiation has not been studied. Here, we report that Pias1 is required for proper embryonic development. Approximately 90% of Pias1 null embryos die in utero between E10.5 and E12.5. We found significant apoptosis within the yolk sac (YS) blood vessels and concomitant loss of red blood cells (RBCs) resulting in profound anemia. In addition, Pias1 loss impairs YS angiogenesis and results in defective capillary plexus formation and blood vessel occlusions. Moreover, heart development is impaired as a result of loss of myocardium muscle mass. Accordingly, we found that Pias1 expression in primary myoblasts enhances the induction of cardiac muscle genes MyoD, Myogenin and Myomaker. PIAS1 protein regulation of cardiac gene transcription is dependent on transcription factors Myocardin and Gata-4. Finally, endothelial cell specific inactivation of Pias1 in vivo impairs YS erythrogenesis, angiogenesis and recapitulates loss of myocardium muscle mass. However, these defects are not sufficient to recapitulate the lethal phenotype of Pias1 null embryos. These findings highlight Pias1 as an essential gene for YS erythropoiesis and vasculogenesis in vivo.