How do bones produce blood?

Red blood cells, which make up the bulk of blood, are produced from stem cells in the bone marrow. Stem cells reproduce in bone marrow and provide the raw material from which red blood calls can be produced.

A pluripotent (undifferentialted) stem cell becomes a multipotent stem cell, which in turn becomes a unipotential stem cell, which is to say it is now a specialized cell destined to become a specific type of blood cell. . After going through a few more stages it is released from the bone marrow, and ultimately becomes an erythrocyte, or mature red blood cell.

White blood cells, which are actually immune cells, are also produced in bone marrow from pluripotential hematopoietic stem cells, but go thorugh different stages to eventually become one of the six types of immune cells classified as white blood cells.