In vitro generation of hematopoietic stem cells (HSCs) from induced pluripotent stem cells (iPSCs) has the potential to provide novel therapeutic approaches for replacing bone marrow (BM) transplantation without rejection or graft versus host disease. Hitherto, however, it has proved difficult to generate truly functional HSCs transplantable to adult host mice. Here, we demonstrate a unique in vivo differentiation system yielding engraftable HSCs from mouse and human iPSCs in teratoma-bearing animals in combination with a maneuver to facilitate hematopoiesis. In mice, we found that iPSC-derived HSCs migrate from teratomas into the BM and their intravenous injection into irradiated recipients resulted in multilineage and long-term reconstitution of the hematolymphopoietic system in serial transfers. Using this in vivo generation system, we could demonstrate that X-linked severe combined immunodeficiency (X-SCID) mice can be treated by HSCs derived from gene-corrected clonal iPSCs. It should also be noted that neither leukemia nor tumors were observed in recipients after transplantation of iPSC-derived HSCs. Taken our findings together, our system presented in this report should provide a useful tool not only for the study of HSCs, but also for practical application of iPSCs in the treatment of hematologic and immunologic diseases.