Interferon gamma (IFNγ) promotes cell division of hematopoietic stem cells (HSCs) without affecting the total HSC number. We postulated that IFNγ stimulates differentiation of HSCs as part of the innate immune response. Here, we report that type II interferon signaling is required, both at baseline and during an animal model of LCMV infection, to maintain normal myeloid development. By separately evaluating myeloid-biased and lymphoid-biased HSC subtypes, we found that myeloid-biased HSCs express higher levels of IFNγ receptor and are specifically activated to divide after recombinant IFNγ exposure in vivo. While both HSC subtypes show increased expression of the transcription factor C/EBPβ after infection, only the myeloid-biased HSCs are transiently depleted from the marrow during the type II interferon-mediated immune response to Mycobacterium avium infection, as measured both functionally and phenotypically. These findings indicate that IFNγ selectively permits differentiation of myeloid-biased HSCs during an innate immune response to infection. This represents the first report of a context and a mechanism for discriminate utilization of the alternate HSC subtypes. Terminal differentiation, at the expense of self-renewal, may compromise HSC populations during states of chronic inflammation. Stem Cells  2014;32:3023–3030