Genetic studies revealed that SHIP1 limits blood cell production and immune regulatory cell numbers in vivo. We postulated that molecular targeting of SHIP1 might enhance blood cell production and increase immunoregulatory capacity. In this study, we report the identification of a chemical inhibitor of SHIP1, 3 α-aminocholestane (3AC). Treatment with 3AC significantly expands the myeloid immunoregulatory cell compartment and impairs the ability of peripheral lymphoid tissues to prime allogeneic T cell responses. In addition, 3AC treatment profoundly increases granulocyte production without triggering the myeloid-associated lung consolidation observed in SHIP1−/− mice. Moreover, 3AC also enhances RBC, neutrophil, and platelet recovery in myelosuppressed hosts. Intriguingly, we also find that chemical inhibition of SHIP1 triggers apoptosis of blood cancer cells. Thus, SHIP1 inhibitors represent a novel class of small molecules that have the potential to enhance allogeneic transplantation, boost blood cell production, and improve the treatment of hematologic malignancies.