Interferon-γ (IFN-γ) inhibits graft-versus-host disease (GVHD) in lethally irradiated mice receiving allogeneic hematopoietic cell transplantation (allo-HCT) but promotes lethality in unirradiated and sublethally irradiated recipients. We investigated the role of IFN-γ in GVHD in sublethally irradiated B6D2F1 recipients of B6 allo-HCT. B6D2F1 mice receiving wild-type B6 splenocytes alone died rapidly, whereas those receiving wild-type B6 splenocytes plus marrow survived long-term. Mice in both groups showed rapid elimination of host hematopoietic cells but minimal parenchymal tissue injury. However, mice receiving allo-HCT from IFN-γ–deficient donors died rapidly regardless of whether donor marrow was given, and they exhibited severe parenchymal injury but prolonged survival of host hematopoietic cells. IFN-γ plays a similar role in another model involving delayed B6 donor leukocyte infusion (DLI) to established mixed allogeneic (B6→BALB/c) chimeras. IFN-γ promotes DLI-mediated conversion from mixed to full donor chimerism while attenuating GVHD. Importantly, IFN-γ enhances graft-versus-leukemia (GVL) effects in both models. Our data indicate that previously reported IFN-γ–induced early mortality in allo-HCT recipients is due to augmentation of lymphohematopoietic graft-versus-host reaction (LGVHR) and can be avoided by providing an adequate source of donor hematopoietic stem/progenitor cells. Furthermore, the magnitude of GVL is correlated with the strength of LGVHR, and IFN-γ reduces the potential of this alloreactivity to cause epithelial tissue GVHD.