Injection of parental lymphocytes into an unirradiated adult F1 host results in an acute GVH reaction characterized by immune deficiency, attack on host lymphohematopoietic tissues, and repopulation with donor-derived cells. All of these events result from the initial activation of donor lymphocytes by host alloantigens. Interaction of pairs of host and donor costimulatory molecules, in particular CD28/CTLA4 and B7-1/B7-2, play a crucial role in this initial activation of donor T cells. We demonstrate here that in vivo treatment of the host with high doses of CTLA4-Ig solely during the initial period of donor alloactivation can completely abort the subsequent development of GVH reaction. Although donor T cells are retained, CTLA4-Ig treatment reduces the initial endogenous cytokine production and arrests the subsequent expansion of donor T cells, the differentiation of anti-host effectors, and the development of severe immune deficiency. This result is consistent with the establishment of host-specific tolerance in the donor population, while maintaining host immune competence.