Mitochondrial tRNA taurine modifications mediated by mitochondrial tRNA translation optimization 1 ( Mto1 ) is essential for the mitochondrial protein translation. Mto1 deficiency was shown to induce proteostress in embryonic stem cells. A recent finding that a patient with MTO1 gene mutation showed severe anemia led us to hypothesize that Mto1 dysfunctions may result in defective erythropoiesis. Hematopoietic-specific Mto1 conditional knockout (cKO) mice were embryonic lethal and showed niche-independent defect in erythroblast proliferation and terminal differentiation. Mechanistically, mitochondrial oxidative phosphorylation complexes were severely impaired in the Mto1 cKO fetal liver, and this was followed by cytosolic iron accumulation. Overloaded cytosolic iron promoted heme biosynthesis, which induced an unfolded protein response (UPR) in Mto1 cKO erythroblasts. An iron chelator or UPR inhibitor rescued erythroid terminal differentiation in the Mto1 cKO fetal liver in vitro. This mitochondrial regulation of iron homeostasis revealed the indispensable role of mitochondrial tRNA modification in fetal hematopoiesis.