We compared interferon alpha (IFN-alpha) therapy with stem cell transplantation (SCT) for patients with chronic-phase chronic myelogenous leukemia in a multicenter prospective study to investigate the optimal indication and timing of SCT, especially from HLA-matched unrelated donors. Of 257 eligible patients, 145 patients who were younger than 50 years were assigned to the IFN-alpha cohort (n = 87) or the SCT cohort (n = 58), according to family donor availability. In the IFN-alpha cohort, 52 patients received IFN-alpha and chemotherapy (the IFN1 group), and 35 patients received an SCT from an unrelated donor (the U-SCT group). In the SCT cohort, 47 patients received an SCT from a related donor (the R-SCT group). In the IFN1 group, 88% of the patients achieved a complete hematologic response, and 33% achieved a complete cytogenetic response. At a median follow-up period of 53 months, the predicted 6-year survival rate was 72% in the IFN1 group, 81% in the R-SCT group, and 81% in the U-SCT group. When overall survival was evaluated for the IFN-alpha and R-SCT cohorts by intention to treat according to family donor availability, the 6-year survival rates were 76% and 84%, respectively. When the outcomes of the U-SCT and IFN1 groups were compared, the survival rate of U-SCT group patients was significantly better than for IFN1 group patients without a major cytogenetic response and seemed better for IFN1 group patients younger than 35 years. Therefore, U-SCT may be recommendable to patients who fail to achieve a major cytogenetic response in IFN-alpha therapy and to younger patients.