CUX1 is a dose-dependent transcription factor frequently mutated or deleted in high-risk myeloid neoplasms. We sought to understand the function of CUX1 in hematopoiesis. Here, utilizing a novel CUX1 reporter mouse, we established that CUX1 levels are dynamically regulated throughout the differentiation of hematopoietic progenitors. Initially, we established a strong correlation between CUX1 levels and the functional capacity of hematopoietic stem cells (HSCs). As CUX1 levels increase, HSCs lose repopulating capacity. The progressive loss of functional capacity can be reversed by the knockdown of CUX1 in HSCs. Accompanying the reversal of CUX1 levels includes the re-establishment of the transcriptome and chromatin accessibility landscape of HSCs with naturally low levels of CUX1. These findings establish CUX1 as a determinant of HSC fate and heterogeneity. Low levels of CUX1 also permit the high expression of interferon-stimulated genes (ISGs), which is a feature of somatic stem cells, including HSCs with low levels of CUX1. We establish that this interferon response and innate immune system activation results from the de-repression, expression, and reverse transcription of endogenous retroelements. The current paradigm posits that high ISG expression is imperative for protection from viral infection. We extend this paradigm to establish that high ISG expression and ERE reverse transcription are also essential for HSC self-renewal. This mechanism of ISG-driven self-renewal could be exploited by myeloid malignancies that have lost CUX1. Our findings advance our understanding of HSC fate and self-renewal, demonstrating that CUX1 finely controls the earliest steps of hematopoiesis by regulating innate immune system activation.