Development of normal blood cells is often suppressed in juvenile myelomonocytic leukemia (JMML), a myeloproliferative neoplasm (MPN) of childhood, causing complications and impacting therapeutic outcomes. However, the mechanism underlying this phenomenon remains uncharacterized. To address this question, we induced the most common mutation identified in JMML (Ptpn11E76K) specifically in the myeloid lineage with hematopoietic stem cells (HSCs) spared. These mice uniformly developed a JMML-like MPN. Importantly, HSCs in the same bone marrow (BM) microenvironment were aberrantly activated and differentiated at the expense of self-renewal. As a result, HSCs lost quiescence and became exhausted. A similar result was observed in wild-type (WT) donor HSCs when co-transplanted with Ptpn11E76K/+ BM cells into WT mice. Co-culture testing demonstrated that JMML/MPN cells robustly accelerated differentiation in mouse and human normal hematopoietic stem/progenitor cells. Cytokine profiling revealed that Ptpn11E76K/+ MPN cells produced excessive IL-1β, but not IL-6, T NF-α, IFN-γ, IL-1α, or other inflammatory cytokines. Depletion of the IL-1β receptor effectively restored HSC quiescence, normalized their pool size, and rescued them from exhaustion in Ptpn11E76K/+/IL-1R-/- double mutant mice. These findings suggest IL-1β signaling as a potential therapeutic target for preserving normal hematopoietic development in JMML.