The Ufm1 conjugation system is a novel ubiquitin-like modification system, consisting of Ufm1, Uba5 (E1), Ufc1 (E2) and poorly characterized E3 ligase(s). RCAD/Ufl1 (also known as KIAA0776, NLBP and Maxer) was reported to function as a Ufm1 E3 ligase in ufmylation (Ufm1-mediated conjugation) of DDRGK1 and ASC1 proteins. It has also been implicated in estrogen receptor signaling, unfolded protein response (UPR) and neurodegeneration, yet its physiological function remains completely unknown. In this study, we report that RCAD/Ufl1 is essential for embryonic development, hematopoietic stem cell (HSC) survival and erythroid differentiation. Both germ-line and somatic deletion of RCAD/Ufl1 impaired hematopoietic development, resulting in severe anemia, cytopenia and ultimately animal death. Depletion of RCAD/Ufl1 caused elevated endoplasmic reticulum stress and evoked UPR in bone marrow cells. In addition, loss of RCAD/Ufl1 blocked autophagic degradation, increased mitochondrial mass and reactive oxygen species, and led to DNA damage response, p53 activation and enhanced cell death of HSCs. Collectively, our study provides the first genetic evidence for the indispensable role of RCAD/Ufl1 in murine hematopoiesis and development. The finding of RCAD/Ufl1 as a key regulator of cellular stress response sheds a light into the role of a novel protein network including RCAD/Ufl1 and its associated proteins in regulating cellular homeostasis.