Abstract PPM1D encodes a phosphatase that is recurrently activated across cancer, most notably in therapy-related myeloid neoplasms. However, the function of PPM1D in hematopoiesis and its contribution to tumor cell growth remain incompletely understood. Using conditional mouse models, we uncover a central role for Ppm1d in hematopoiesis and validate its potential as a therapeutic target. We find that Ppm1d regulates the competitive fitness and self-renewal of hematopoietic stem cells (HSCs) with and without exogenous genotoxic stresses. We also show that although Ppm1d activation confers cellular resistance to cytotoxic therapy, it does so to a lesser degree than p53 loss, informing the clonal competition phenotypes often observed in human studies. Notably, loss of Ppm1d sensitizes leukemias to cytotoxic therapies in vitro and in vivo, even in the absence of a Ppm1d mutation. Vulnerability to PPM1D inhibition is observed across many cancer types and dependent on p53 activity. Importantly, organism-wide loss of Ppm1d in adult mice is well tolerated, supporting the tolerability of pharmacologically targeting PPM1D. Our data link PPM1D gain-of-function mutations to the clonal expansion of HSCs, inform human genetic observations, and support the therapeutic targeting of PPM1D in cancer.