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In chronic renal failure, anemia primarily arises due to inadequate production of erythropoietin, a hormone mostly produced by the kidneys that is essential for the stimulation of red blood cell production in the bone marrow. When the kidneys are damaged, their ability to produce erythropoietin diminishes, leading to a reduced stimulation of red blood cell production. This reduction ultimately results in decreased hemoglobin levels, leading to anemia.

Other mechanisms that may contribute to anemia in these patients include the impact of uremia on red blood cell lifespan and disturbances in iron metabolism, but the lack of erythropoietin is the primary direct cause. While there can be blood loss in the urine due to other complications, and iron availability can also be affected in chronic kidney disease, the hallmark feature explaining the development of anemia is the insufficient erythropoietin production.