Transforming growth factor-β1 (TGF-β1) is a pleiotropic cytokine with major in vitro effects on hematopoietic stem cells (HSCs) and lymphocyte development. Little is known about hematopoiesis from mice with constitutive TGF-β1 inactivation largely because of important embryonic lethality and development of a lethal inflammatory disorder in TGF-β1^−/− pups, making these studies difficult. Here, we show that no sign of the inflammatory disorder was detectable in 8- to 10-day-old TGF-β1^−/− neonates as judged by both the number of T-activated and T-regulator cells in secondary lymphoid organs and the level of inflammatory cytokines in sera. After T-cell depletion, the inflammatory disease was not transplantable in recipient mice. Bone marrow cells from 8- to 10-day-old TGF-β1^−/− neonates showed strikingly impaired short- and long-term reconstitutive activity associated with a parallel decreased in vivo homing capacity of lineage negative (Lin⁻) cells. In addition an in vitro–reduced survival of immature progenitors (Lin⁻ Kit⁺ Sca⁺) was observed. Similar defects were found in liver cells from TGF-β1^−/− embryos on day 14 after vaginal plug. These data indicate that TGF-β1 is a critical regulator for in vivo homeostasis of the HSCs, especially for their homing potential.