In a recessive ENU mutagenesis screen for embryonic lethality, we identified a mouse pedigree with a missense mutation of SHIP1 (SHIP1el20) leading to an amino acid substitution I641T in the inositol-5′-phosphatase domain that represses phosphatidylinositol-3-kinase signaling. Despite detectable expression of functional SHIP1 protein, the phenotype of homozygous SHIP1el20/el20 mice was more severe than gene-targeted SHIP1-null (SHIP1−/−) mice. Compared with age-matched SHIP1−/− mice, 5-week-old SHIP1el20/el20 mice had increased myeloid cells, serum IL-6 levels, marked reductions in lymphoid cells, and died by 7 weeks of age with infiltration of the lungs by activated macrophages. Bone marrow transplantation demonstrated that these defects were hematopoietic-cell-autonomous. We show that the el20 mutation reduces expression in SHIP1el20/el20 macrophages of both SHIP1 and s-SHIP, an isoform of SHIP1 generated by an internal promoter. In contrast, SHIP1−/− macrophages express normal levels of s-SHIP. Compound heterozygous mice (SHIP1−/el20) had the same phenotype as SHIP1−/− mice, thus providing genetic proof that the more severe phenotype of SHIP1el20/el20 mice is probably the result of concomitant loss of SHIP1 and s-SHIP. Our results suggest that s-SHIP synergizes with SHIP1 for suppression of macrophage activation, thus providing the first evidence for a role of s-SHIP in adult hematopoiesis.