We portrayed the Notch system in embryonic stem cell (ESC)-derived embryoid bodies (EBs) differentiating under the standard protocols used to assess yolk sac (YS) hematopoiesis in vitro. Notch receptors and Notch ligands were detected in virtually all cells throughout EB development. Notch1 and Notch 2, but not Notch4, were visualized in the nucleus of EB cells, and all these receptors were also observed as patent cytoplasmic foci. Notch ligands (Delta-like1 and 4, Jagged1 and 2) were immunodetected mostly as cytoplasmic foci. Widespread Notch1 activation was evident at days 2–4 of EB differentiation, the time window of hemangioblast generation in this in vitro system. EBs experienced major spatial remodeling beyond culture day 4, the time point coincident with the transition between primitive and multilineage waves of YS hematopoiesis in vitro. At day 6, where definitive YS hematopoiesis is established in EBs, these exhibit an immature densely packed cellular region (DCR) surrounded by a territory of mesodermal-like cells and an outer layer of endodermal cells. Immunolabeling of Notch receptors and ligands was usually higher in the DCR. Our results show that Notch system components are continuously and abundantly expressed in the multicellular environments arising in differentiating EBs. In such an active Notch system, receptors and ligands do not accumulate extensively at the cell surface but instead localize at cytoplasmic foci, an observation that fits current knowledge on endocytic modulation of Notch signaling. Our data thus suggest that Notch may function as a territorial modulator during early development, where it may eventually influence YS hematopoiesis.