Mesenchymal cells contribute to the 'stroma' of most normal and malignant tissues, with specific mesenchymal cells participating in the regulatory niches of stem cells. By examining how mesenchymal osteolineage cells modulate haematopoiesis, here we show that deletion of Dicer1 specifically in mouse osteoprogenitors, but not in mature osteoblasts, disrupts the integrity of haematopoiesis. Myelodysplasia resulted and acute myelogenous leukaemia emerged that had acquired several genetic abnormalities while having intact Dicer1. Examining gene expression altered in osteoprogenitors as a result of Dicer1 deletion showed reduced expression of Sbds, the gene mutated in Schwachman-Bodian-Diamond syndrome-a human bone marrow failure and leukaemia pre-disposition condition. Deletion of Sbds in mouse osteoprogenitors induced bone marrow dysfunction with myelodysplasia. Therefore, perturbation of specific mesenchymal subsets of stromal cells can disorder differentiation, proliferation and apoptosis of heterologous cells, and disrupt tissue homeostasis. Furthermore, primary stromal dysfunction can result in secondary neoplastic disease, supporting the concept of niche-induced oncogenesis.