The erythropoietin receptor (EpoR) is essential for production of red blood cells; a principal function of EpoR is to rescue committed erythroid progenitors from apoptosis. Stat5 is rapidly activated following EpoR stimulation, but its function in erythropoiesis has been unclear since adult Stat5a^−/−5b^−/− mice have normal steady-state hematocrit. Here we show that Stat5 is essential for the high erythropoietic rate during fetal development. Stat5a^−/−5b^−/− embryos are severely anemic; erythroid progenitors are present in low numbers, show higher levels of apoptosis, and are less responsive to Epo. These findings are explained by a crucial role for Stat5 in EpoR's antiapoptotic signaling: it mediates the immediate-early induction of Bcl-X_L in erythroid cells through direct binding to the Bcl-X promoter.