During chronic infection, the inflammatory cytokine interferon gamma (IFNγ) damages hematopoietic stem cells (HSCs) by disrupting quiescence and promoting excessive terminal differentiation. However, the mechanism by which IFNγ hinders HSC quiescence remains undefined. Using intravital 3-dimensional microscopy, we find that IFNγ disrupts the normally close interaction between HSCs and CXCL12-abundant reticular (CAR) cells in the HSC niche. IFNγ stimulation increases expression of the cell surface protein BST2, which we find is required for IFNγ-dependent HSC relocalization and activation. IFNγ stimulation of HSCs increases their E-selectin binding by BST2 and homing to the bone marrow, which depends on E-selectin binding. Upon chronic infection, HSCs from mice lacking BST2 are more quiescent and more resistant to depletion than HSCs from wild-type mice. Overall, this study defines a critical mechanism by which IFNγ promotes niche relocalization and activation in response to inflammatory stimulation and identifies BST2 as a key regulator of HSC quiescence. VIDEO ABSTRACT.