Leucine carboxyl methyltransferase-1 (LCMT-1) methylates the C-terminal leucine α-carboxyl group of the catalytic subunits of the protein phosphatase 2A (PP2A) subfamily of protein phosphatases, PP2Ac, PP4c, and PP6c. LCMT-1 differentially regulates the formation and function of a subset of the heterotrimeric complexes that PP2A and PP4 form with their regulatory subunits. Global LCMT-1 knockout causes embryonic lethality in mice, but LCMT-1 function in development is unknown. In this study, we analyzed the effects of global LCMT-1 loss on embryonic development. LCMT-1 knockout causes loss of PP2Ac methylation, indicating that LCMT-1 is the sole PP2Ac methyltransferase. PP2A heterotrimers containing the Bα and Bδ B-type subunits are dramatically reduced in whole embryos, and the steady-state levels of PP2Ac and the PP2A structural A subunit are also down ∼30%. Strikingly, global loss of LCMT-1 causes severe defects in fetal hematopoiesis and usually death by embryonic day 16.5. Fetal livers of homozygous knockout embryos display hypocellularity, elevated apoptosis, and greatly reduced numbers of hematopoietic stem and progenitor cell-enriched KitLinSca1 cells. The percent cycling cells and mitotic indices of WT and knockout fetal liver cells are similar, suggesting that hypocellularity may be due to a combination of apoptosis and/or defects in specification, self-renewal, or survival of stem cells. Indicative of a possible intrinsic defect in stem cells, noncompetitive and competitive transplantation experiments reveal that loss causes a severe multilineage hematopoietic repopulating defect. Therefore, this study reveals a novel role for LCMT-1 as a key player in fetal liver hematopoiesis.