Little is known about how leukemia cells alter the bone marrow (BM) niche to facilitate their own growth and evade chemotherapy. Here, we provide evidence that acute myeloid leukemia (AML) blasts remodel the BM niche into a leukemia growth-permissive and normal hematopoiesis-suppressive microenvironment through exosome secretion. Either engrafted AML cells or AML-derived exosomes increased mesenchymal stromal progenitors and blocked osteolineage development and bone formation in vivo. Preconditioning with AML-derived exosomes ‘primed’ the animals for accelerated AML growth. Conversely, disruption of exosome secretion in AML cells through targeting Rab27a, an important regulator involved in exosome release, significantly delayed leukemia development. In BM stromal cells, AML-derived exosomes induced the expression of DKK1, a suppressor of normal hematopoiesis and osteogenesis, thereby contributing to osteoblast loss. Conversely, treatment with a DKK1 inhibitor delayed AML progression and prolonged survival in AML-engrafted mice. In addition, AML-derived exosomes induced a broad downregulation of hematopoietic stem cell-supporting factors (for example, CXCL12, KITL and IGF1) in BM stromal cells and reduced their ability to support normal hematopoiesis. Altogether, this study uncovers novel features of AML pathogenesis and unveils how AML cells create a self-strengthening leukemic niche that promotes leukemic cell proliferation and survival, while suppressing normal hematopoiesis through exosome secretion.