Previous experimental studies have shown that acute graft-versus-host disease (GVHD) is associated with two waves of donor CD8(+) T cell expansion. In the current studies, we used in vivo bioluminescent imaging, in vivo BrdU labeling, and three different experimental GVHD systems to show that B7-H1 expression by recipient parenchymal cells controls the second wave of alloreactive donor CD8(+) T cell expansion and the associated second phase of GVHD. Loss of B7-H1 expression by parenchymal cells during the course of GVHD was associated with persistent proliferation of donor CD8(+) T cells in GVHD target tissues and continued tissue injury, whereas persistent expression of B7-H1 expression by parenchymal cells led to reduced proliferation of donor CD8(+) T cells in GVHD target tissues and resolution of GVHD. These studies demonstrate that parenchymal cell expression of B7-H1 is required for tolerizing infiltrating T cells and preventing the persistence of GVHD. Our results suggest that therapies designed to preserve or restore expression of B7-H1 expression by parenchymal tissues in the recipient could prevent or ameliorate GVHD in humans.