Umbilical cord blood (UCB) is being increasingly used for hematopoietic stem cell transplantation and has been associated with a reduced incidence of severe graft-versus-host disease (GVHD). To further investigate the relative merits of unrelated donor UCB versus bone marrow (BM), a matched-pair analysis comparing the outcomes of recipients of 0 to 3 human leukocyte antigen (HLA)–mismatched UCB and HLA-A, B, DRB1-matched BM was performed. UCB patients, who received cyclosporine (CSA) and methylprednisolone (MP), were matched for age, diagnosis, and disease stage with BM patients, who received either methotrexate (MTX) and CSA (26 pairs) or T-cell depletion (TCD) and CSA/MP (31 pairs). Patients were predominantly children (median age, 5 years) undergoing transplantation for malignancy, storage diseases, BM failure, and immunodeficiency syndromes between 1991 and 1999. Although neutrophil recovery was significantly slower after UCB transplantation, the probability of donor-derived engraftment at day 45 was 88% in UCB versus 96% in BM-MTX recipients (P = .41) and 85% in UCB versus 90% in BM-TCD recipients (P = .32), respectively. Platelet recovery was similar in UCB versus BM pairs. Furthermore, incidences of acute and chronic GVHD were similar in UCB and BM recipients, with 53% of UCB versus 41% of BM-MTX recipients alive (P = .40) and 52% of UCB versus 56% of BM-TCD recipients alive at 2 years (P > .80), respectively. These data suggest that despite increased HLA disparity, probabilities of engraftment, GVHD, and survival after UCB transplantation are comparable to those observed after HLA-matched BM transplantation. Therefore, UCB should be considered an acceptable alternative to HLA-matched BM for pediatric patients.