Taspase1, a highly conserved threonine protease encoded by TASP1, cleaves nuclear histone-modifying factors and basal transcription regulators to orchestrate diverse transcription programs. Hereditary loss-of-function mutation of TASP1 has recently been reported in humans as resulting in an anomaly complex syndrome, which manifests with hematological, facial, and skeletal abnormalities. Here, we demonstrate that Taspase1-mediated cleavage of TFIIAα-β, rather than of MLL1 or MLL2, in mouse embryos was required for proper fetal liver hematopoiesis and correct segmental identities of the axial skeleton. Homozygous genetic deletion of Taspase1 disrupted embryonic hematopoietic stem cell self-renewal and quiescence states and axial skeleton fates. Strikingly, mice carrying knockin noncleavable mutations of TFIIAα-β, a well-characterized basal transcription factor, displayed more pronounced fetal liver and axial skeleton defects than those with noncleavable MLL1 and MLL2, 2 trithorax group histone H3 trimethyl transferases. Our study offers molecular insights into a syndrome in humans that results from loss of TASP1 and describes an unexpected role of TFIIAα-β cleavage in embryonic cell fate decisions.