Vertebrate hematopoietic stem cells (HSCs) emerge in the aorta-gonad-mesonephros (AGM) region from "hemogenic" endothelium. Here we show that the proinflammatory cytokine interferon-γ (IFN-γ) and its receptor Crfb17 positively regulate HSC development in zebrafish. This regulation does not appear to modulate the proliferation or survival of HSCs or endothelial cells, but rather the endothelial-to-HSC transition. Notch signaling and blood flow positively regulate the expression of ifng and crfb17 in the AGM. Notably, IFN-γ overexpression partially rescues the HSC loss observed in the absence of blood flow or Notch signaling. Importantly, IFN-γ signaling acts cell autonomously to control the endothelial-to-HSC transition. IFN-γ activates Stat3, an atypical transducer of IFN-γ signaling, in the AGM, and Stat3 inhibition decreases HSC formation. Together, our findings uncover a developmental role for an inflammatory cytokine and place its action downstream of Notch signaling and blood flow to control Stat3 activation and HSC emergence.