Few studies have tested the benefits of using peripheral blood stem cell (PBSC) grafts versus bone marrow (BM) grafts for unrelated donor transplantation. Yet there has been a substantial change in clinical practice, with increasing numbers of adults receiving unrelated donor PBSC grafts. We compared outcomes after 331 PBSC and 586 BM transplants in adults with leukemia and myelodysplastic syndrome (MDS) who were followed for a median of 3 years after transplantation. PBSC recipients were less likely to have chronic myelogenous leukemia (CML) and more likely to have MDS, to have poor performance scores, and to be transplanted more recently. Outcomes were analyzed using Cox regression models. Rates of grades 2-4 acute graft-versus-host disease (GVHD) (58% versus 45%, P < .001) and chronic GVHD (cGVHD) (56% versus 42%, P < .001) were significantly higher with PBSC than with BM transplants. Rates of grade II-IV aGVHD were similar with PBSC and BM transplants. The 3-year probabilities of treatment-related mortality (TRM), leukemia recurrence, leukemia-free, and overall survival (OS) were similar in the 2 groups with 3-year leukemia-free survival rates of 30% and 32% after transplantation of PBSC and BM, respectively. Unlike results after HLA-matched sibling donor PBSC transplants, we did not identify a survival advantage with PBSC grafts in patients receiving unrelated donor transplants for advanced leukemia. The higher rate of cGVHD after PBSC transplants and, consequently, more frequent late adverse events warrant extended follow up of PBSC recipients.