Self-renewing hematopoietic stem/progenitor cells (HSPCs) produce blood cells of all lineages throughout life. Phosphatase and tensin homolog (PTEN), a tumor suppressor that antagonizes phosphatidylinositol 3-kinase (PI3K) signaling, is frequently mutated in hematologic malignancies such as bone marrow failure and leukemia. We set out to investigate whether Pten is required for hematopoiesis. Analysis of zebrafish mutants lacking functional Pten revealed that HSPCs colonized the caudal hematopoietic tissue normally. There, HSPCs hyperproliferated and engaged in all blood lineages. However, they failed to differentiate into mature blood cells. Hence, Pten mutant zebrafish embryos displayed hallmarks of leukemia in humans. Inhibition of PI3K signaling in mutants lacking functional Pten suppressed hyperproliferation and released the differentiation arrest. We conclude that Pten has an essential role in the balance between proliferation and differentiation of blood cells.