Hypoxia is beneficial for the differentiation of stem cells transplanted for myocardial injury, but mechanisms underlying this benefit remain unsolved. Here, we report the impact of hypoxia-induced Jagged1 expression in cardiomyocytes (CMs) for driving the differentiation of cardiac stem cells (CSCs). Forced hypoxia-inducible factor 1α (HIF-1α) expression and physical hypoxia (5% O2) treatment could induce Jagged1 expression in neonatal rat CMs. Pharmacological inhibition of HIF-1α by YC-1 attenuated hypoxia-promoted Jagged1 expression in CMs. An ERK inhibitor (PD98059), but not inhibitors of JNK (SP600125), Notch (DAPT), NF-κB (PTDC), JAK (AG490), or STAT3 (Stattic) suppressed hypoxia-induced Jagged1 protein expression in CMs. c-Kit+ CSCs isolated from neonatal rat hearts using a magnetic-activated cell sorting method expressed GATA4, SM22α or vWF, but not Nkx2.5 and cTnI. Moreover, 87.3% of freshly isolated CSCs displayed Notch1 receptor expression. Direct co-culture of CMs with BrdU-labeled CSCs enhanced CSCs differentiation, as evidenced by an increased number of BrdU+/Nkx2.5+ cells, while intermittent hypoxia for 21 days promoted co-culture-triggered differentiation of CSCs into CM-like cells. Notably, YC-1 and DAPT attenuated hypoxia-induced differentiation. Our results suggest that hypoxia induces Jagged1 expression in CMs primarily through ERK signaling, and facilitates early cardiac lineage differentiation of CSCs in CM/CSC co-cultures via HIF-1α/Jagged1/Notch signaling.