Hematopoietic stem cell (HSC) therapy has shown promise for tissue regeneration after ischemia. Therefore, there is a need to understand mechanisms underlying endogenous HSCs activation in response to ischemic stress and coordination of angiogenesis and repair. SHP-1 plays important roles in HSC quiescence and differentiation by regulation of TGF-β1 signaling. TGF-β1 promotes angiogenesis by stimulating stem cells to secrete growth factors to initiate the formation of blood vessels and later aid in their maturation. We propose that SHP-1 responds to ischemia stress in HSC and progenitor cells (HSPC) via regulation of TGF-β1. A mouse hind limb ischemia model was used. Local blood perfusion in the limbs was determined using laser doppler perfusion imaging. The number of positive blood vessels per square millimeter, as well as blood vessel diameter (μm) and area (μm2), were calculated. Hematopoietic cells were analyzed using flow cytometry. The bone marrow transplantation assay was performed to measure HSC reconstitution. After femoral artery ligation, TGF-β1 was initially decreased in the bone marrow by day 3 of ischemia, followed by an increase on day 7. This pattern was opposite to that in the peripheral blood, which is concordant with the response of HSC to ischemic stress. In contrast, SHP-1 deficiency in HSC is associated with irreversible activation of HSPCs in the bone marrow and increased circulating HSPCs in peripheral blood following limb ischemia. In addition, there was augmented auto-induction of TGF-β1 and sustained inactivation of SHP-1-Smad2 signaling, which impacted TGF-β1 expression in HSPCs in circulation. Importantly, restoration of normal T GF-β1 oscillations helped in the recovery of limb repair and function. HSPC-SHP-1-mediated regulation of TGF-β1 in both bone marrow and peripheral blood is required for a normal response to ischemic stress.