Haematopoietic stem cells (HSCs) are responsible for the lifelong production of blood cells. The accumulation of DNA damage in HSCs is a hallmark of ageing and is probably a major contributing factor in age-related tissue degeneration and malignant transformation. A number of accelerated ageing syndromes are associated with defective DNA repair and genomic instability, including the most common inherited bone marrow failure syndrome, Fanconi anaemia. However, the physiological source of DNA damage in HSCs from both normal and diseased individuals remains unclear. Here we show in mice that DNA damage is a direct consequence of inducing HSCs to exit their homeostatic quiescent state in response to conditions that model physiological stress, such as infection or chronic blood loss. Repeated activation of HSCs out of their dormant state provoked the attrition of normal HSCs and, in the case of mice with a non-functional Fanconi anaemia DNA repair pathway, led to a complete collapse of the haematopoietic system, which phenocopied the highly penetrant bone marrow failure seen in Fanconi anaemia patients. Our findings establish a novel link between physiological stress and DNA damage in normal HSCs and provide a mechanistic explanation for the universal accumulation of DNA damage in HSCs during ageing and the accelerated failure of the haematopoietic system in Fanconi anaemia patients.