The myeloid tumor suppressor KMT2C is recurrently deleted in myelodysplastic syndrome (MDS) and acute myeloid leukemia (AML), particularly therapy-related MDS/AML (t-MDS/t-AML), as part of larger chromosome 7 deletions. Here, we show that KMT2C deletions convey a selective advantage to hematopoietic stem cells (HSCs) after chemotherapy treatment that may precipitate t-MDS/t-AML. Kmt2c deletions markedly enhance murine HSC self-renewal capacity without altering proliferation rates. Haploid Kmt2c deletions convey a selective advantage only when HSCs are driven into cycle by a strong proliferative stimulus, such as chemotherapy. Cycling Kmt2c-deficient HSCs fail to differentiate appropriately, particularly in response to interleukin-1. Kmt2c deletions mitigate histone methylation/acetylation changes that accrue as HSCs cycle after chemotherapy, and they impair enhancer recruitment during HSC differentiation. These findings help explain why Kmt2c deletions are more common in t-MDS/t-AML than in de novo AML or clonal hematopoiesis: they selectively protect cycling HSCs from differentiation without inducing HSC proliferation themselves.