The rae28 gene (rae28), also designated as mph1, is a mammalian ortholog of the Drosophila polyhomeotic gene, a member of Polycomb group genes (PcG). rae28 constitutes PcG complex 1 for maintaining transcriptional states which have been once initiated, presumably through modulation of the chromatin structure. Hematopoietic activity was impaired in the fetal liver of rae28-deficient animals (rae28−/−), as demonstrated by progressive reduction of hematopoietic progenitors of multilineages and poor expansion of colony forming units in spleen (CFU-S12) during embryonic development. An in vitro long-term culture-initiating cell assay suggested a reduction in hematopoietic stem cells (HSCs), which was confirmed in vivo by reconstitution experiments in lethally irradiated congenic recipient mice. The competitive repopulating units (CRUs) reflect HSCs supporting multilineage blood-cell production. CRUs were generated, whereas the number of CRUs was reduced by a factor of 20 in the rae28−/− fetal liver. We also performed serial transplantation experiments to semiquantitatively measure self-renewal activity of CRUs in vivo. Self-renewal activity of CRUs was 15-fold decreased in rae28−/−. Thus the compromised HSCs were presumed to reduce hematopoietic activity in the rae28−/− fetal liver. This is the first report to suggest that rae28 has a crucial role in sustaining the activity of HSCs to maintain hematopoiesis.