A tight regulation of transcription factor activity is critical for proper development. For instance, modifications of RUNX transcription factors dosage are associated with several diseases, including hematopoietic malignancies. In Drosophila, Myeloid Leukemia Factor (MLF) has been shown to control blood cell development by stabilizing the RUNX transcription factor Lozenge (Lz). However, the mechanism of action of this conserved family of proteins involved in leukemia remains largely unknown. Here we further characterized MLF’s mode of action in Drosophila blood cells using proteomic, transcriptomic and genetic approaches. Our results show that MLF and the Hsp40 co-chaperone family member DnaJ-1 interact through conserved domains and we demonstrate that both proteins bind and stabilize Lz in cell culture, suggesting that MLF and DnaJ-1 form a chaperone complex that directly regulates Lz activity. Importantly, dnaj-1 loss causes an increase in Lz+ blood cell number and size similarly as in mlf mutant larvae. Moreover we find that dnaj-1 genetically interacts with mlf to control Lz level and Lz+ blood cell development in vivo. In addition, we show that mlf and dnaj-1 loss alters Lz+ cell differentiation and that the increase in Lz+ blood cell number and size observed in these mutants is caused by an overactivation of the Notch signaling pathway. Finally, using different conditions to manipulate Lz activity, we show that high levels of Lz are required to repress Notch transcription and signaling. All together, our data indicate that the MLF/DnaJ-1-dependent increase in Lz level allows the repression of Notch expression and signaling to prevent aberrant blood cell development. Thus our findings establish a functional link between MLF and the co-chaperone DnaJ-1 to control RUNX transcription factor activity and Notch signaling during blood cell development in vivo.