The immunopathologic condition known as graft-versus-host disease (GVHD) results from a type I T-cell process. However, a prototypical type I cytokine, interferon-γ (IFN-γ), can protect against several manifestations of GVHD in recipients of major histocompatibility complex (MHC)–mismatched hematopoietic cells. We transplanted hematopoietic cells from C3H.SW donors in wild-type (wt) and IFN-γ-receptor–deficient (IFN-γRKO) MHC-matched C57BL/6 recipients. In IFN-γRKO recipients, host cells were unresponsive to IFN-γ, whereas wt donor cells were exposed to exceptionally high levels of IFN-γ. From an IFN-γ perspective, we could therefore evaluate the impact of a loss-of-function on host cells and gain-of-function on donor cells. We found that lack of IFN-γR prevented up-regulation of MHC proteins on host cells but did not mitigate damage to most target organs. Two salient phenotypes in IFN-γRKO recipients involved donor cells: lymphoid hypoplasia and hematopoietic failure. Lymphopenia was due to FasL-induced apoptosis and decreased cell proliferation. Bone marrow aplasia resulted from a decreased proliferation of hematopoietic stem/progenitor cells that was associated with down-regulation of 2 genes negatively regulated by IFN-γ: Ccnd1 and Myc. We conclude that IFN-γ produced by alloreactive T cells may entail a severe graft-versus-graft reaction and could be responsible for cytopenias that are frequently observed in subjects with GVHD.