Rare cells with the properties of stem cells are integral to the development and perpetuation of leukaemias. A defining characteristic of stem cells is their capacity to self-renew, which is markedly extended in leukaemia stem cells. The underlying molecular mechanisms, however, are largely unknown. Here we demonstrate that expression of the cell-cycle inhibitor p21 is indispensable for maintaining self-renewal of leukaemia stem cells. Expression of leukaemia-associated oncogenes in mouse haematopoietic stem cells (HSCs) induces DNA damage and activates a p21-dependent cellular response, which leads to reversible cell-cycle arrest and DNA repair. Activated p21 is critical in preventing excess DNA-damage accumulation and functional exhaustion of leukaemic stem cells. These data unravel the oncogenic potential of p21 and suggest that inhibition of DNA repair mechanisms might function as potent strategy for the eradication of the slowly proliferating leukaemia stem cells.