To establish a preclinical animal model for testing drugs with potential effects on myeloproliferative neoplasms (MPNs), we first performed a detailed phenotypic characterization of Cre-inducible transgenic JAK2-V617F mice. Deleting the conditional mouse Jak2-knockout alleles increased erythropoiesis and accentuated the polycythemia vera phenotype, but did not alter platelet or granulocyte levels. In a transplantation assay, JAK2-V617F(+) BM cells had an advantage over wild-type competitor cells. Using this competitive repopulation assay, we compared the effects of INC424 (ruxolitinib), a dual Jak1/Jak2 inhibitor, and hydroxyurea (HU). HU led to weight loss, but did not reduce spleen weight. The hematologic parameters were lowered and a slight decrease of the mutant allele burden was noted. INC424 had little effect on body weight, but strongly decreased spleen size and rapidly normalized RBC and neutrophil parameters. No significant decrease in the mutant allele burden was observed. INC424 reduced the phospho-Stat5 levels, whereas HU strongly increased phospho-Stat5, most likely because of the elevated erythropoietin levels in response to the HU-induced anemia. This compensatory increase in JAK/STAT signaling may counteract the beneficial effects of cytoreduction at higher doses of HU and represents an adverse effect that should be avoided.