Cell-intrinsic checkpoints limit the proliferative capacity of primary cells in response to telomere dysfunction. It is not known, however, whether telomere dysfunction contributes to cell-extrinsic alterations that impair stem cell function and organ homeostasis. Here we show that telomere dysfunction provokes defects of the hematopoietic environment that impair B lymphopoiesis but increase myeloid proliferation in aging telomerase knockout (Terc(-/-)) mice. Moreover, the dysfunctional environment limited the engraftment of transplanted wild-type hematopoietic stem cells (HSCs). Dysfunction of the hematopoietic environment was age dependent and correlated with progressive telomere shortening in bone marrow stromal cells. Telomere dysfunction impaired mesenchymal progenitor cell function, reduced the capacity of bone marrow stromal cells to maintain functional HSCs, and increased the expression of various cytokines, including granulocyte colony-stimulating factor (G-CSF), in the plasma of aging mice. Administration of G-CSF to wild-type mice mimicked some of the defects seen in aging Terc(-/-) mice, including impairment of B lymphopoiesis and HSC engraftment. Conversely, inhibition of G-CSF improved HSC engraftment in aged Terc(-/-) mice. Taken together, these results show that telomere dysfunction induces alterations of the environment that can have implications for organismal aging and cell transplantation therapies