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Abstract Background Hematopoiesis in mammal is a complex and highly regulated process in which hematopoietic stem cells (HSCs) give rise to all types of differentiated blood cells. Previous studies have shown that hairy and enhancer of split (HES) repressors are essential regulators of adult HSC development downstream of Notch signaling. Methods In this study, we investigated the role of HES1, a member of HES family, in fetal hematopoiesis using an embryonic hematopoietic specific Hes1 conditional knockout mouse model by using phenotypic flow cytometry, histopathology analysis, and functional in vitro colony forming unit (CFU) assay and in vivo bone marrow transplant (BMT) assay. Results We found that loss of Hes1 in early embryonic stage leads to smaller embryos and fetal livers, decreases hematopoietic stem progenitor cell (HSPC) pool, results in defective multi-lineage differentiation. Functionally, fetal hematopoietic cells deficient for Hes1 exhibit reduced in vitro progenitor activity and compromised in vivo repopulation capacity in the transplanted recipients. Further analysis shows that fetal hematopoiesis defects in Hes1 fl/fl Flt3Cre embryos are resulted from decreased proliferation and elevated apoptosis, associated with de-repressed HES1 targets, p27 and PTEN in Hes1-KO fetal HSPCs. Finally, pharmacological inhibition of p27 or PTEN improves fetal HSPCs function both in vitro and in vivo. Conclusion Together, our findings reveal a previously unappreciated role for HES1 in regulating fetal hematopoiesis, and provide new insight into the differences between fetal and adult HSC maintenance.