Endogenous DNA damage is causally associated with the functional decline and transformation of stem cells that characterize aging. DNA lesions that have escaped DNA repair can induce replication stress and genomic breaks that induce senescence and apoptosis. It is not clear how stem and proliferating cells cope with accumulating endogenous DNA lesions and how these ultimately affect the physiology of cells and tissues. Here we have addressed these questions by investigating the hematopoietic system of mice deficient for Rev1, a core factor in DNA translesion synthesis (TLS), the postreplicative bypass of damaged nucleotides. Rev1 hematopoietic stem and progenitor cells displayed compromised proliferation, and replication stress that could be rescued with an antioxidant. The additional disruption of Xpc, essential for global-genome nucleotide excision repair (ggNER) of helix-distorting nucleotide lesions, resulted in the perinatal loss of hematopoietic stem cells, progressive loss of bone marrow, and fatal aplastic anemia between 3 and 4 months of age. This was associated with replication stress, genomic breaks, DNA damage signaling, senescence, and apoptosis in bone marrow. Surprisingly, the collapse of the Rev1Xpc bone marrow was associated with progressive mitochondrial dysfunction and consequent exacerbation of oxidative stress. These data reveal that, to protect its genomic and functional integrity, the hematopoietic system critically depends on the combined activities of repair and replication of helix-distorting oxidative nucleotide lesions by ggNER and Rev1-dependent TLS, respectively. The error-prone nature of TLS may provide mechanistic understanding of the accumulation of mutations in the hematopoietic system upon aging.