Nonsense-mediated mRNA decay (NMD) is a post-transcriptional surveillance process that eliminates mRNAs containing premature termination codons (PTCs). NMD has been hypothesized to impact on several aspects of cellular function; however, its importance in the context of a mammalian organism has not been addressed in detail. Here we use mouse genetics to demonstrate that hematopoietic-specific deletion of Upf2, a core NMD factor, led to the rapid, complete, and lasting cell-autonomous extinction of all hematopoietic stem and progenitor populations. In contrast, more differentiated cells were only mildly affected in Upf2-null mice, suggesting that NMD is mainly essential for proliferating cells. Furthermore, we show that UPF2 loss resulted in the accumulation of nonproductive rearrangement by-products from the Tcrb locus and that this, as opposed to the general loss of NMD, was particularly detrimental to developing T-cells. At the molecular level, gene expression analysis showed that Upf2 deletion led to a profound skewing toward up-regulated mRNAs, highly enriched in transcripts derived from processed pseudogenes, and that NMD impacts on regulated alternative splicing events. Collectively, our data demonstrate a unique requirement of NMD for organismal survival.