JAK2V617F⁺ myeloproliferative neoplasms (MPNs) frequently progress into leukemias, but the factors driving this process are not understood. Here, we find excess Hedgehog (HH) ligand secretion and loss of PTCH2 in myeloproliferative disease, which drives canonical and noncanonical HH-signaling. Interestingly, Ptch2^−/− mice mimic dual pathway activation and develop a MPN-phenotype with leukocytosis (neutrophils and monocytes), strong progenitor and LKS mobilization, splenomegaly, anemia, and loss of lymphoid lineages. HSCs exhibit increased cell cycling with improved stress hematopoiesis after 5-FU treatment, and this results in HSC exhaustion over time. Cytopenias, LKS loss, and mobilization are all caused by loss of Ptch2 in the niche, whereas hematopoietic loss of Ptch2 drives leukocytosis and promotes LKS maintenance and replating capacity in vitro. Ptch2^−/− niche cells show hyperactive noncanonical HH signaling, resulting in reduced production of essential HSC regulators (Scf, Cxcl12, and Jag1) and depletion of osteoblasts. Interestingly, Ptch2 loss in either the niche or in hematopoietic cells dramatically accelerated human JAK2V617F-driven pathogenesis, causing transformation of nonlethal chronic MPNs into aggressive lethal leukemias with >30% blasts in the peripheral blood. Our findings suggest HH ligand inhibitors as possible drug candidates that act on hematopoiesis and the niche to prevent transformation of MPNs into leukemias.