Although popularized by the literature of Hasidism – particularly that produced by Chabad-Lubavitch – Panentheism (the idea that everything exists spatially within God, and that God thereby permeates all things in the universe) is not an authentically Jewish idea.
The third principle of Jewish Faith as codified by the Rambam states explicitly that the Creator “has no physical body and is not a force which resides within a physical body” (אינו גוף ולא כח בגוף). This statement precludes the basic tenet of Panentheism, i.e. that God resides actually within and around everything that exists.
Additionally, Rav Saadiah Gaon in his well-known work HaNivhar Emunot Ve-Deot discusses ideas related to the mechanism by which God created the universe as postulated by the various religions and philosophical schools. One of the twelve theories of creation discussed is Emanationism (i.e. the idea that God emanated his own essence into the lower forms of the creation).
“The third theory is that of him that asserts that the Creator of physical bodies has created them out of His own essence…” (Ma’amar Rishon, III)
The Gaon then goes on to refute this theory with 13 refutations. Emanationism requires a belief in Panentheism.
Judaism has always championed the belief in creatio ex nihilo (creation from nothing) by a completely transcendent and non-physical God whom is completely removed from His creation. Although there were those (including the Ibn `Ezra and Gersonides) who believed in creation from some primordial matter (creation from something), this matter is never equated by them with God or the Divine “essence” (kivyakhol).
Panentheism, although championed by many as the true view of the Torah, is certainly a mistake and an aberration.