Cytokine-mobilized peripheral blood is increasingly used instead of bone marrow as the source of cells for allogeneic transplantation. Although cells lead to faster hematologic recovery, their effects on graft-versus-host disease, relapse, and survival are less certain. Between January 1996 and February 2000, 228 patients with chronic myeloid leukemia, acute myeloid leukemia, or myelodysplasia were randomized to receive either bone marrow or peripheral blood allografts from HLA-matched siblings. All patients received busulfan and cyclophosphamide as conditioning chemotherapy and cyclosporine and methotrexate as graft-versus-host disease prophylaxis. We compared the times to neutrophil and platelet recovery, acute and chronic graft-versus-host disease, relapse, and overall survival between the groups. The median times to neutrophil recovery were 19 days and 23 days and the times to platelet recovery were 16 days and 22 days in the peripheral blood and bone marrow groups, respectively (P <.0001 for both comparisons). The cumulative incidence of grades II to IV acute graft-versus-host disease 100 days after transplantation was 44% in both groups (hazard ratio, 0.99; 95% confidence interval, 0.66-1.49; P >.9), and the incidence of extensive chronic graft-versus-host disease at 30 months after transplantation was 40% with peripheral blood and 30% with bone marrow (hazard ratio, 1.23; 95% confidence interval, 0.78-1.96; P =.37). There was no statistically significant difference in the probability of relapse of the underlying disease between the groups. The probabilities of survival at 30 months after transplantation were 68% and 60% in the peripheral blood and bone marrow groups, respectively (hazard ratio, 0.62; 95% confidence interval, 0.39-0.97; P =.04). In patients with chronic myeloid leukemia, acute myeloid leukemia, and myelodysplasia undergoing allogeneic transplantation from matched siblings, the use of peripheral blood instead of bone marrow leads to faster hematologic recovery, similar risk of graft-versus-host disease, and improved survival.