Notch signaling regulates several cellular processes including cell fate decisions and proliferation in both invertebrates and mice. However, comparatively less is known about the role of Notch during early human development. Here, we examined the function of Notch signaling during hematopoietic lineage specification from human pluripotent stem cells of both embryonic and adult fibroblast origin. Using immobilized Notch ligands and small interfering RNA to Notch receptors we have demonstrated that Notch1, but not Notch2, activation induced hairy and enhancer of split 1 (HES1) expression and generation of committed hematopoietic progenitors. Using gain- and loss-of-function approaches, this was shown to be attributed to Notch-signaling regulation through HES1, which dictated cell fate decisions from bipotent precursors either to the endothelial or hematopoietic lineages at the clonal level. Our study reveals a previously unappreciated role for the Notch pathway during early human hematopoiesis, whereby Notch signaling via HES1 represents a toggle switch of hematopoietic vs endothelial fate specification.