Maternal metabolism provides essential nutrients to enable embryonic development. However, both mother and embryo produce reactive metabolites that can damage DNA. Here we discover how the embryo is protected from these genotoxins. Pregnant mice lacking Aldh2, a key enzyme that detoxifies reactive aldehydes, cannot support the development of embryos lacking the Fanconi anemia DNA repair pathway gene Fanca. Remarkably, transferring Aldh2(-/-)Fanca(-/-) embryos into wild-type mothers suppresses developmental defects and rescues embryonic lethality. These rescued neonates have severely depleted hematopoietic stem and progenitor cells, indicating that despite intact maternal aldehyde catabolism, fetal Aldh2 is essential for hematopoiesis. Hence, maternal and fetal aldehyde detoxification protects the developing embryo from DNA damage. Failure of this genome preservation mechanism might explain why birth defects and bone marrow failure occur in Fanconi anemia, and may have implications for fetal well-being in the many women in Southeast Asia that are genetically deficient in ALDH2.