In a subset of patients with non-del(5q) myelodysplastic syndrome (MDS), lenalidomide promotes erythroid lineage competence and effective erythropoiesis. To determine the mechanism by which lenalidomide promotes erythropoiesis, we investigated its action on erythropoietin receptor (EpoR) cellular dynamics. Lenalidomide upregulated expression and stability of JAK2-associated EpoR in UT7 erythroid cells and primary CD71+ erythroid progenitors. The effects of lenalidomide on receptor turnover were Type I cytokine receptor specific, as evidenced by coregulation of the IL3-Rα receptor but not c-Kit. To elucidate this mechanism, we investigated the effects of lenalidomide on the E3 ubiquitin ligase RNF41. Lenalidomide promoted EpoR/RNF41 association and inhibited RNF41 auto-ubiquitination, accompanied by a reduction in EpoR ubiquitination. To confirm that RNF41 is the principal target responsible for EpoR stabilization, HEK293T cells were transfected with EpoR and/or RNF41 gene expression vectors. Steady-state EpoR expression was reduced in EpoR/RNF41 cells, whereas EpoR upregulation by lenalidomide was abrogated, indicating that cellular RNF41 is a critical determinant of drug-induced receptor modulation. Notably, shRNA suppression of CRBN gene expression failed to alter EpoR upregulation, indicating that drug-induced receptor modulation is independent of cereblon. Immunohistochemical staining showed that RNF41 expression decreased in primary erythroid cells of lenalidomide-responding patients, suggesting that cellular RNF41 expression merits investigation as a biomarker for lenalidomide response. Our findings indicate that lenalidomide has E3 ubiquitin ligase inhibitory effects that extend to RNF41 and that inhibition of RNF41 auto-ubiquitination promotes membrane accumulation of signaling competent JAK2/EpoR complexes that augment Epo responsiveness. Cancer Res; 76(12); 3531–40. ©2016 AACR.