FTY720 is a novel immunosuppressant that improves the outcomes after solid organ and bone marrow transplantation (BMT) due to the sequestration of T cells into LN. We tested the hypothesis that the sequestration of donor T cells in LN by FTY720 would enhance their interaction with host APC, thus causing a greater degree of activation-induced apoptosis of alloreactive T cells, and thereby resulting in a reduction of graft-vs.-host disease (GVHD). The short-term administration of FTY720 improved the recipient survival after allogeneic BMT. FTY720 treatment facilitated a rapid contraction of the donor T cell pool in association with an increased degree of apoptosis of donor T cells. The donor T cell reactivity to host alloantigens was diminished in host's LN and adoptive transfer of donor T cells isolated from LN of FTY720-treated recipients of allogeneic BMT induced less severe GVHD in secondary recipients than the transfer from controls. Caspase-dependent apoptosis was involved in this mechanism because FTY720-induced protection was abrogated when a pan-caspase inhibitor was administered. These findings thus demonstrate the presence of a novel mechanism by which FTY720 modulates the allogeneic T cell responses: namely, by the induction of activation-induced apoptosis of alloreactive T cells in LN.