Natural killer (NK) cells suppress graft-versus-host disease (GVHD) without causing GVHD themselves. Our previous studies demonstrated that allogeneic T cells and NK cells traffic similarly after allogeneic bone marrow transplantation (BMT). We therefore investigated the impact of donor NK cells on donor alloreactive T cells in GVHD induction. Animals receiving donor NK and T cells showed improved survival and decreased GVHD score compared with controls receiving donor T cells alone. Donor T cells exhibited less proliferation, lower CD25 expression, and decreased interferon-γ (IFN-γ) production in the presence of NK cells. In vivo, we observed perforin- and Fas ligand (FasL)–mediated reduction of donor T cell proliferation and increased T cell apoptosis in the presence of NK cells. Further, activated NK cells mediated direct lysis of reisolated GVHD-inducing T cells in vitro. The graft-versus-tumor (GVT) effect was retained in the presence of donor NK cells. We demonstrate a novel mechanism of NK cell–mediated GVHD reduction whereby donor NK cells inhibit and lyse autologous donor T cells activated during the initiation of GVHD.