The use of accessory cells to enhance hematopoietic stem cell (HSC) engraftment could have a significant therapeutic impact, especially when stem cell numbers are limited. The bone marrow (BM) microenvironment is involved in regulation of HSC, allowing production of mature blood cells while maintaining HSC self renewal. To date, the precise identity of specific cells in the microenvironment that exert this regulatory effect on HSC has not been defined. We recently reported that CD8+/TCR− facilitating cells (FC), a subpopulation of BM cells containing predominantly B220+/CD11c+/CD11b− tolerogenic precursor-plasmacytoid dendritic cells, enhance HSC engraftment in allogeneic recipients. Additionally, FC significantly enhance engraftment of limiting numbers of HSC in syngeneic recipients. In the present studies, we investigated the mechanism of FC-mediated enhancement of HSC engraftment. We show for the first time that FC significantly increase HSC survival in vitro and exert an anti-apoptotic effect on HSC via TNF-α. Co-culture of FC with HSC induces production of physiologically relevant low levels of TNF-α by FC. FC from TNF-α−/− mice are impaired in function in vitro and in facilitating HSC engraftment in vivo. Furthermore, neutralization of TNF-α on FC using anti-TNF antibody results in loss of FC function in vitro, confirming a major role for TNF-α in FC function. Notably, co-culture of FC with HSC prevents HSC apoptosis and is associated with significant upregulation of the anti-apoptotic I-κB family member Bcl-3 in HSC. Blocking of TNF-α on FC abrogates the anti-apoptotic effect of FC on HSC and prevents upregulation of Bc1-3 in HSC. Taken together, these findings demonstrate that TNF-α-induced in FC affects highly primitive HSC and identify Bcl-3 as a possible pathway for TNF-α in regulating HSC survival.