Anemic stress induces stress erythropoiesis, which rapidly generates new erythrocytes to restore tissue oxygenation. Stress erythropoiesis is best understood in mice where it is extramedullary occurring primarily in the spleen. However, both human and mouse stress erythropoiesis utilize signals and progenitor cells that are distinct from steady state erythropoiesis. Immature stress erythroid progenitors (SEPs) are derived from short-term hematopoietic stem cells (ST-HSCs). Although the SEPs are capable of self-renewal, they are erythroid restricted. Inflammation and anemic stress induce the rapid proliferation of SEPs, but they do not differentiate until serum erythropoietin (Epo) levels increase. Here we show that rather than directly regulating SEPs, Epo promotes this transition from proliferation to differentiation by acting on macrophages in the splenic niche. During the proliferative stage, macrophages produce canonical Wnt ligands that promote proliferation and inhibit differentiation. Epo/Stat5 dependent signaling induces the production of bioactive lipid mediators in macrophages. Increased production of prostaglandin J2 (PGJ2) activates peroxisome proliferator-activated receptor gamma (PPARg) dependent repression of Wnt expression, while increased production of prostaglandin E2 (PGE2) promotes the differentiation of SEPs.