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Remodeling of the bone marrow microenvironment in chronic inflammation and in aging reduces hematopoietic stem cell (HSC) function. To assess the mechanisms of this functional decline of HSC and find strategies to counteract it, we established a model in which the Sfrp1 gene was deleted in Osterix+ osteolineage cells (OS1Δ/Δ mice). HSC from these mice showed severely diminished repopulating activity with associated DNA damage, enriched expression of the reactive oxygen species pathway and reduced single-cell proliferation. Interestingly, not only was the protein level of Catenin beta-1 (bcatenin) elevated, but so was its association with the phosphorylated co-activator p300 in the nucleus. Since these two proteins play a key role in promotion of differentiation and senescence, we inhibited in vivo phosphorylation of p300 through PP2A-PR72/130 by administration of IQ-1 in OS1Δ/Δ mice. This treatment not only reduced the b-catenin/phosphop300 association, but also decreased nuclear p300. More importantly, in vivo IQ-1 treatment fully restored HSC repopulating activity of the OS1Δ/Δ mice. Our findings show that the osteoprogenitor Sfrp1 is essential for maintaining HSC function. Furthermore, pharmacological downregulation of the nuclear b-catenin/phospho-p300 association is a new strategy to restore poor HSC function.