Fanconi anemia (FA) is an inherited DNA repair disorder characterized by progressive bone marrow failure (BMF) from hematopoietic stem and progenitor cell (HSPC) attrition. A greater understanding of the pathogenesis of BMF could improve the therapeutic options for FA patients. Using a genome-wide shRNA screen in human FA fibroblasts, we identify transforming growth factor-β (TGF-β) pathway-mediated growth suppression as a cause of BMF in FA. Blocking the TGF-β pathway improves the survival of FA cells and rescues the proliferative and functional defects of HSPCs derived from FA mice and FA patients. Inhibition of TGF-β signaling in FA HSPCs results in elevated homologous recombination (HR) repair with a concomitant decrease in non-homologous end-joining (NHEJ), accounting for the improvement in cellular growth. Together, our results suggest that elevated TGF-β signaling contributes to BMF in FA by impairing HSPC function and may be a potential therapeutic target for the treatment of FA.