The innate plasticity of hematopoietic progenitors is tightly regulated to supply blood cells during normal hematopoiesis and in response to stress or infection. We demonstrate that in the Drosophila lymph gland (LG) the tumor suppressors TSC and PTEN control blood progenitor proliferation through a common TOR- and 4EBP-dependent pathway. Tsc2 or Pten deficiency in progenitors increases TOR signaling and causes LG overgrowth by increasing the number of actively dividing cells that accumulate high levels of phosphorylated (p) 4EBP during a critical window of growth. These phenotypes are associated with increased reactive oxygen species (ROS) levels in the LG, and scavenging ROS in progenitors is sufficient to rescue overgrowth. Blood progenitor number is also sensitive to starvation and hypoxia in a TOR-dependent manner. Differences between Tsc1/2 and Pten function become apparent at later stages. Loss of Tsc1/2 autonomously increases p4EBP and decreases pAKT levels, expands the number of intermediate progenitors and limits terminal differentiation, except for a late induction of lamellocytes. By contrast, absence of PTEN increases p4EBP and pAKT levels and induces myeloproliferative expansion of plasmatocytes and crystal cells. This increased malignancy is associated with non-autonomous increases in p4EBP levels within peripheral differentiating hemocytes, culminating in their premature release into circulation and demonstrating potential non-autonomous effects of Pten dysfunction on malignancy. This study highlights mechanistic differences between TSC and PTEN on TOR function and demonstrates the multifaceted roles of a nutrient-sensing pathway in orchestrating proliferation and differentiation of myeloid-specific blood progenitors through regulation of ROS levels and the resulting myeloproliferative disorder when dysregulated.