We characterized leukemia stem cells (LSC) in chronic phase chronic myelogenous leukemia (CML) using a transgenic mouse model. LSC were restricted to cells with long-term hematopoietic stem cell (LTHSC) phenotype. CML LTHSC demonstrated reduced homing and retention in the bone marrow (BM), related to decreased CXCL12 expression in CML BM, resulting from increased G-CSF production by leukemia cells. Altered cytokine expression in CML BM was associated with selective impairment of normal LTHSC growth and a growth advantage to CML LTHSC. Imatinib (IM) treatment partially corrected abnormalities in cytokine levels and LTHSC growth. These results were validated using human CML samples and provide improved understanding of microenvironmental regulation of normal and leukemic LTHSC and their response to IM in CML. © 2012 Elsevier Inc.