Hematopoietic stem cells (HSCs) are thought to arise in the aorta-gonad-mesonephros (AGM) region of embryo proper, although HSC activity can be detected in yolk sac (YS) and paraaortic splanchnopleura (P-Sp) when transplanted in newborn mice. We examined the role of Notch signaling in embryonic hematopoiesis. The activity of colony-forming cells in the YS from Notch1^−/− embryos was comparable to that of wild-type embryos. However, in vitro and in vivo definitive hematopoietic activities from YS and P-Sp were severely impaired in Notch1^−/− embryos. The population representing hemogenic endothelial cells, however, did not decrease. In contrast, Notch2^−/− embryos showed no hematopoietic deficiency. These data indicate that Notch1, but not Notch2, is essential for generating hematopoietic stem cells from endothelial cells.