RNA modifications are emerging as key determinants of gene expression. However, compelling genetic demonstrations of their relevance to human disease are lacking. Here, we link ribosomal RNA 2'-O-methylation (2'-O-Me) to the etiology of dyskeratosis congenita. We identify nucleophosmin (NPM1) as an essential regulator of 2'-O-Me on rRNA by directly binding C/D box small nucleolar RNAs, thereby modulating translation. We demonstrate the importance of 2'-O-Me-regulated translation for cellular growth, differentiation and hematopoietic stem cell maintenance, and show that Npm1 inactivation in adult hematopoietic stem cells results in bone marrow failure. We identify NPM1 germline mutations in patients with dyskeratosis congenita presenting with bone marrow failure and demonstrate that they are deficient in small nucleolar RNA binding. Mice harboring a dyskeratosis congenita germline Npm1 mutation recapitulate both hematological and nonhematological features of dyskeratosis congenita. Thus, our findings indicate that impaired 2'-O-Me can be etiological to human disease.