Bone marrow graft failure and poor graft function are frequent complications after hematopoietic stem cell transplantation and result in significant morbidity and mortality. Both conditions are associated with graft-versus-host disease (GVHD), although the mechanism remains undefined. Here we show, in 2 distinct murine models of GVHD (complete MHC- and class II-disparate) that mimic human peripheral blood stem cell transplantation, that Th1 CD4+ cells induce bone marrow failure in allogeneic recipients. Bone marrow failure after transplantation of allogeneic naïve CD4+ T cells was associated with increased CD4+ Th1 cell development within bone marrow and lymphoid tissues. Using IFNγ-reporter mice, we found that Th1 cells generated during GVHD induced bone marrow failure after transfers into secondary recipients. Homing studies demonstrated that transferred Th1 cells express CXCR4, which was associated with accumulation within bone marrow and spleen. Allogeneic Th1 cells were activated by radiation-resistant host bone marrow cells and induced bone marrow failure through an IFNγ-dependent mechanism. Thus, allogeneic Th1 CD4+ cells generated during GVHD traffic to hematopoietic sites and induce bone marrow failure via IFNγ-mediated toxicity. These results have important implications for prevention and treatment of bone marrow graft failure after hematopoietic stem cell transplantation. © 2013 American Society for Blood and Marrow Transplantation.