Hypoxia affects many physiologic processes during early stages of mammalian ontogeny, particularly placental and vascular development. In the adult, the hypoxic bone marrow microenvironment plays a role in regulating hematopoietic stem cell (HSC) function. HSCs are generated from the major vasculature of the embryo, but whether the hypoxic response affects the generation of these HSCs is as yet unknown. Here we examined whether Hypoxia Inducible Factor1-alpha (HIF1α), a key modulator of the response to hypoxia, is essential for HSC development. We found hypoxic cells in embryonic tissues that generate and expand hematopoietic cells (aorta, placenta and fetal liver), and specifically aortic endothelial and hematopoietic cluster cells. A Cre/loxP conditional knockout (cKO) approach was taken to delete HIF1α in Vascular Endothelial-Cadherin expressing endothelial cells, the precursors to definitive hematopoietic cells. Functional assays show that HSC and hematopoietic progenitor cells (HPCs) are significantly reduced in cKO aorta and placenta. Moreover, decreases in phenotypic aortic hematopoietic cluster cells in cKO embryos indicate that HIF1α is necessary for generation and/or expansion of HPCs and HSCs. cKO adult BM HSCs are also affected under transplantation conditions. Thus, HIF1α is a regulator of HSC generation and function beginning at the earliest embryonic stages.