Microenvironmental signals can determine hematopoietic stem cell (HSC) fate choices both directly and through stimulation of niche cells. In the bone marrow, prostaglandin E₂ (PGE₂) is known to affect both osteoblasts and osteoclasts, whereas in vitro it expands HSCs and affects differentiation of hematopoietic progenitors. We hypothesized that in vivo PGE₂ treatment could expand HSCs through effects on both HSCs and their microenvironment. PGE₂-treated mice had significantly decreased number of bone trabeculae, suggesting disruption of their microarchitecture. In addition, in vivo PGE₂ increased lineage⁻ Sca-1⁺ c-kit⁺ bone marrow cells without inhibiting their differentiation. However, detailed immunophenotyping demonstrated a PGE₂-dependent increase in short-term HSCs/multipotent progenitors (ST-HSCs/MPPs) only. Bone marrow cells transplanted from PGE₂ versus vehicle-treated donors had superior lymphomyeloid reconstitution, which ceased by 16 weeks, also suggesting that ST-HSCs were preferentially expanded. This was confirmed by serial transplantation studies. Thus in vivo PGE₂ treatment, probably through a combination of direct and microenvironmental actions, preferentially expands ST-HSCs in the absence of marrow injury, with no negative impact on hematopoietic progenitors or long-term HSCs. These novel effects of PGE₂ could be exploited clinically to increase donor ST-HSCs, which are highly proliferative and could accelerate hematopoietic recovery after stem cell transplantation.