Preventing unfavorable GVHD without inducing broad suppression of the immune system presents a major challenge of allogeneic hematopoietic stem cell transplantation (allo-HSCT). We developed a novel strategy to ameliorate GVHD while preserving graft-versus-tumor (GVT) activity by small molecule-based inhibition of the NF-κB family member c-Rel. Underlying mechanisms included reduced alloactivation, defective gut homing, and impaired negative feedback on interleukin (IL)-2 production, resulting in optimal IL-2 levels, which, in the absence of competition by effector T cells, translated into expansion of regulatory T cells. c-Rel activity was dispensable for antigen-specific T-cell receptor (TCR) activation, allowing c-Rel-deficient T cells to display normal GVT activity. In addition, inhibition of c-Rel activity reduced alloactivation without compromising antigen-specific cytotoxicity of human T cells. Finally, we were able to demonstrate the feasibility and efficacy of systemic c-Rel inhibitor administration. Our findings validate c-Rel as a promising target for immunomodulatory therapy and demonstrate the feasibility and efficacy of pharmaceutical inhibition of c-Rel activity.