Notch signaling plays a crucial role in the control of proliferation and differentiation of stem and progenitor cells during embryogenesis or organogenesis, but its regulation is incompletely understood. BLOS2, encoded by the Bloc1s2 gene, is a shared subunit of two lysosomal trafficking complexes, biogenesis of lysosome-related organelles complex-1 (BLOC-1) and BLOC-1 related complex. Bloc1s2(-/-) mice were embryonic lethal and exhibited defects in cortical development and hematopoiesis. Loss of BLOS2 resulted in elevated Notch signaling, which consequently increased the proliferation of neural progenitor cells and inhibited neuronal differentiation in cortices. Likewise, ablation of bloc1s2 in zebrafish or mice led to increased hematopoietic stem and progenitor cell production in the aorta-gonad-mesonephros region. BLOS2 physically interacted with Notch1 in endo-lysosomal trafficking of Notch1. Our findings suggest that BLOS2 is a novel negative player in regulating Notch signaling through lysosomal trafficking by controlling multiple stem and progenitor cell homeostasis in vertebrates.