Here we report the use of diffusion maps and network synthesis from state transition graphs to better understand developmental pathways from single cell gene expression profiling. We map the progression of mesoderm towards blood in the mouse by single-cell expression analysis of 3,934 cells, capturing cells with blood-forming potential at four sequential developmental stages. By adapting the diffusion plot methodology for dimensionality reduction to single-cell data, we reconstruct the developmental journey to blood at single-cell resolution. Using transitions between individual cellular states as input, we develop a single-cell network synthesis toolkit to generate a computationally executable transcriptional regulatory network model that recapitulates blood development. Model predictions were validated by showing that Sox7 inhibits primitive erythropoiesis, and that Sox and Hox factors control early expression of Erg. We therefore demonstrate that single-cell analysis of a developing organ coupled with computational approaches can reveal the transcriptional programs that control organogenesis.