We report the results of a prospective study of a reduced-intensity conditioning (RIC) regimen followed by allogeneic peripheral blood stem cell transplantation (PBSCT) from an HLA-identical sibling in 37 patients with acute myeloid leukemia (AML; n = 17) or myelodysplastic syndrome (MDS; n = 20). The median age was 57 years, and 22 (59%) were beyond the early phase of their disease. The incidence of grade II to IV acute graft-versus-host disease (GVHD) was 19% (5% grade III-IV), and the 1-year incidence of chronic extensive GVHD was 46%. With a median follow-up of 297 days (355 days in 24 survivors), the 1-year probability of transplant-related mortality was 5%, and the 1-year progression-free survival was 66%. The 1-year incidence of disease progression in patients with and without GVHD was 13% (95% CI, 4%-34%) and 58% (95% CI, 36%-96%), respectively (P =.008). These results suggest that a graft-versus-leukemia effect plays a crucial role in reducing the risk of relapse after a RIC allograft in AML and MDS.