Multiple myeloma (MM) is a clonal plasma cell disorder frequently accompanied by hematopoietic impairment. We show that hematopoietic stem and progenitor cells (HSPCs), in particular megakaryocyte-erythrocyte progenitors, are diminished in the BM of MM patients. Genomic profiling of HSPC subsets revealed deregulations of signaling cascades, most notably TGFβ signaling, and pathways involved in cytoskeletal organization, migration, adhesion, and cell-cycle regulation in the patients. Functionally, proliferation, colony formation, and long-term self-renewal were impaired as a consequence of activated TGFβ signaling. In accordance, TGFβ levels in the BM extracellular fluid were elevated and mesenchymal stromal cells (MSCs) had a reduced capacity to support long-term hematopoiesis of HSPCs that completely recovered on blockade of TGFβ signaling. Furthermore, we found defective actin assembly and down-regulation of the adhesion receptor CD44 in MM HSPCs functionally reflected by impaired migration and adhesion. Still, transplantation into myeloma-free NOG mice revealed even enhanced engraftment and normal differentiation capacities of MM HSPCs, which underlines that functional impairment of HSPCs depends on MM-related microenvironmental cues and is reversible. Taken together, these data implicate that hematopoietic suppression in MM emerges from the HSPCs as a result of MM-related microenvironmental alterations.