Haematopoietic stem cells (HSCs) maintain lifelong blood production and increase blood cell numbers in response to chronic and acute injury. However, the mechanism(s) by which inflammatory insults are communicated to HSCs and their consequences for HSC activity remain largely unknown. Here, we demonstrate that interleukin-1 (IL-1), which functions as a key pro-inflammatory ‘emergency’ signal, directly accelerates cell division and myeloid differentiation of HSCs through precocious activation of a PU.1-dependent gene program. Although this effect is essential for rapid myeloid recovery following acute injury to the bone marrow, chronic IL-1 exposure restricts HSC lineage output, severely erodes HSC self-renewal capacity, and primes IL-1-exposed HSCs to fail massive replicative challenges such as transplantation. Importantly, these damaging effects are transient and fully reversible on IL-1 withdrawal. Our results identify a critical regulatory circuit that tailors HSC responses to acute needs, and is likely to underlie deregulated blood homeostasis in chronic inflammation conditions.