We previously found that CD8 T cells from IFN-γ gene knockout (GKO) donors induce more severe lethal GVHD compared with CD8 T cells from wild-type (WT) donors in fully MHC-mismatched strain combinations. In this study, we investigated the mechanisms by which IFN-γ inhibits GVHD in a parent → F1 (B6 → B6D2F1) allogeneic HCT (allo-HCT) model. IFN-γ was strongly protective against GVHD in this parent → F1 haplotype-mismatched allo-HCT model. Irradiated B6D2F1 mice that received GKO B6 CD4-depleted splenocytes developed lethal GVHD with severe lung and liver injury, whereas those receiving a similar cell population from WT B6 donors survived long term. Donor CD8 cells showed rapid activation, accelerated cell division, and reduced/delayed activation-induced cell death in allogeneic recipients in which donor cells were incapable of producing IFN-γ. In consequence, the numbers of activated/effector (ie, CD25⁺, CD62L⁻, and CD44^high) donor CD8 T cells in the recipients of GKO allo-HCT significantly exceeded those in mice receiving WT allo-HCT. These data show that IFN-γ negatively regulates the CD8 T cell response by inhibiting cell division and promoting cell death and suggest that blockade of IFN-γ could augment the severity of GVHD in patients undergoing allo-HCT.