The initiation of graft-vs-host disease (GVHD) after stem cell transplantation is dependent on direct Ag presentation by host APCs, whereas the effect of donor APC populations is unclear. We studied the role of indirect Ag presentation in allogenic T cell responses by adding populations of cytokine-expanded donor APC to hemopoietic grafts that would otherwise induce lethal GVHD. Progenipoietin-1 (a synthetic G-CSF/Flt-3 ligand molecule) and G-CSF expanded myeloid dendritic cells (DC), plasmacytoid DC, and a novel granulocyte-monocyte precursor population (GM) that differentiate into class II+, CD80/CD86+, CD40− APC during GVHD. Whereas addition of plasmacytoid and myeloid donor DC augmented GVHD, GM cells promoted transplant tolerance by MHC class II-restricted generation of IL-10-secreting, Ag-specific regulatory T cells. Importantly, although GM cells abrogated GVHD, graft-vs-leukemia effects were preserved. Thus, a population of cytokine-expanded GM precursors function as regulatory APCs, suggesting that G-CSF derivatives may have application in disorders characterized by a loss of self-tolerance.