Members of the B7 family have been shown to be important for regulating immune responses by providing either positive or negative costimulatory signals. The function of B7-H3 has been controversial. We show that B7-H3 is upregulated in graft-versus-host disease (GVHD) target organs, including the colon, liver, and lung. Infusion of allogeneic donor T cells into B7-H3(-/-) vs wild-type (WT) recipients resulted in increased GVHD lethality associated with increased T-cell proliferation, colonic inflammatory cytokines, and destruction of epithelial barriers. Allogeneic B7-H3(-/-) vs WT donor T cells also had increased T-cell proliferation and GVHD lethality associated with increased proliferation and cytokine secretion in the spleen, intraepithelial lymphocyte inflammatory cytokines, and intestinal permeability. Both resting and activated regulatory T cells (Tregs) lack B7-H3 messenger RNA. Consistent with these data, GVHD was augmented in recipients of B7-H3(-/-) Treg-depleted grafts. In two delayed lymphocyte infusion (DLI) models, T cells lacking B7-H3 are capable of providing graft-versus-leukemia (GVL) effects. We conclude that B7-H3 is responsible for providing a negative costimulatory signal. Our studies provide support for developing and testing new therapies directed toward the B7-H3 pathway, including approaches to augment host B7-H3 early after bone marrow transplantation to prevent GVHD and to develop potent antagonistic antibodies later after transplant to facilitate DLI-mediated GVL without GVHD complications. © 2015 by The American Society of Hematology.