To clarify the molecular pathways governing hematopoietic stem cell (HSC) development, we screened a fetal liver (FL) HSC cDNA library and identified a unique gene, hematopoietic expressed mammalian polycomb (hemp), encoding a protein with a zinc-finger domain and four malignant brain tumor (mbt) repeats. To investigate its biological role, we generated mice lacking Hemp (hemp(-/-)). Hemp(-/-) mice exhibited a variety of skeletal malformations and died soon after birth. In the FL, hemp was preferentially expressed in the HSC and early progenitor cell fractions, and analyses of fetal hematopoiesis revealed that the number of FL mononuclear cells, including HSCs, was reduced markedly in hemp(-/-) embryos, especially during early development. In addition, colony-forming and competitive repopulation assays demonstrated that the proliferative and reconstitution abilities of hemp(-/-) FL HSCs were significantly impaired. Microarray analysis revealed alterations in the expression levels of several genes implicated in hematopoietic development and differentiation in hemp(-/-) FL HSCs. These results demonstrate that Hemp, an mbt-containing protein, plays essential roles in HSC function and skeletal formation. It is also hypothesized that Hemp might be involved in certain congenital diseases, such as Klippel-Feil anomaly.