Disruption of the polyubiquitin gene Ubc leads to a defect in fetal liver development, which can be partially rescued by increasing the amount of ubiquitin. However, it is still not known why Ubc is required for fetal liver development and the nature of the defective cell types responsible for embryonic lethality have not been characterized. In this study, we assessed the cause of embryonic lethality with respect to the fetal liver hematopoietic system. We found that Ubc was highly expressed in the embryonic liver, and the proliferation capacity of fetal liver cells was reduced in Ubc^−/− embryos. Specifically, Ubc was most highly expressed in hematopoietic cells, and the proliferation capacity of hematopoietic cells was significantly impaired in Ubc^−/− embryos. While hematopoietic cell and hematopoietic stem cell (HSC) frequency was maintained in Ubc^−/− embryos, the absolute number of these cells was diminished because of reduced total liver cell number in Ubc^−/− embryos. Transplantations of fetal liver cells into lethally irradiated recipient mice by non-competitive and competitive reconstitution methods indicated that disruption of Ubc does not significantly impair the intrinsic function of fetal liver HSCs. These findings suggest that disruption of Ubc reduces the absolute number of HSCs in embryonic livers, but has no significant effect on the autonomous function of HSCs. Thus, the lethality of Ubc^−/− embryos is not the result of intrinsic HSC failure.