Dyskeratosis congenita (DC) is an inherited multisystem disorder, characterized by oral leukoplakia, nail dystrophy, and abnormal skin pigmentation, as well as high rates of bone marrow (BM) failure, solid tumors, and other medical problems such as osteopenia. DC and telomere biology disorders (collectively referred to as TBD here) are caused by germline mutations in telomere biology genes leading to very short telomeres and limited proliferative potential of hematopoietic stem cells. We found that skeletal stem cells (SSCs) within the BM stromal cell population (BMSCs, also known as BM-derived mesenchymal stem cells), may contribute to the hematologic phenotype. TBD-BMSCs exhibited reduced clonogenicity, spontaneous differentiation into adipocytes and fibrotic cells, and increased senescence in vitro. Upon in vivo transplantation into mice, TBD-BMSCs failed to form bone or support hematopoiesis, unlike normal BMSCs. TERC reduction (a TBD-associated gene) in normal BMSCs by small interfering TERC-RNA (siTERC-RNA) recapitulated the TBD-BMSC phenotype by reducing proliferation and secondary colony-forming efficiency, and by accelerating senescence in vitro. Microarray profiles of control and siTERC-BMSCs showed decreased hematopoietic factors at the messenger RNA level and decreased secretion of factors at the protein level. These findings are consistent with defects in SSCs/BMSCs contributing to BM failure in TBD.