Myelodysplastic Neoplasms (MDS) and Chronic Myelomonocytic Leukemia (CMML) are clonal disorders driven by progressively acquired somatic mutations in hematopoietic stem cells (HSCs). Hypomethylating agents (HMA) can modify the clinical course of MDS and CMML. Clinical improvement does not require eradication of mutated cells and may be related to improved differentiation capacity of mutated HSCs. However, in patients with established disease it is unclear whether; (a) HSCs with multiple mutations progress through differentiation with comparable frequency to their less mutated counterparts, or (b) improvements in peripheral blood counts following HMA therapy is driven by residual wild-type HSCs or by clones with particular combinations of mutations. To address these questions, we characterised the somatic mutations of individual stem, progenitor (common myeloid progenitor, granulocyte monocyte progenitor, megakaryocyte erythroid progenitor), and matched circulating (monocyte, neutrophil, naïve B) hematopoietic cells in MDS and CMML via high-throughput single-cell genotyping, followed by bulk analysis in immature and mature cells before and after AZA treatment. The mutational burden was similar throughout differentiation, with even the most mutated stem and progenitor clones maintained their capacity to differentiate to mature cell types in vivo. Increased contributions from productive mutant progenitors appear to underlie improved hematopoiesis in MDS following HMA therapy.