Myelodysplastic syndromes (MDSs) are a heterogeneous group of myeloid neoplasms with defects in hematopoietic stem and progenitor cells (HSPCs) and possibly the HSPC niche. Here, we show that patient-derived mesenchymal stromal cells (MDS MSCs) display a disturbed differentiation program and are essential for the propagation of MDS-initiating Lin(-)CD34(+)CD38(-) stem cells in orthotopic xenografts. Overproduction of niche factors such as CDH2 (N-Cadherin), IGFBP2, VEGFA, and LIF is associated with the ability of MDS MSCs to enhance MDS expansion. These factors represent putative therapeutic targets in order to disrupt critical hematopoietic-stromal interactions in MDS. Finally, healthy MSCs adopt MDS MSC-like molecular features when exposed to hematopoietic MDS cells, indicative of an instructive remodeling of the microenvironment. Therefore, this patient-derived xenograft model provides functional and molecular evidence that MDS is a complex disease that involves both the hematopoietic and stromal compartments. The resulting deregulated expression of niche factors may well also be a feature of other hematopoietic malignancies.