Transplantation of hematopoietic stem cells from healthy donors can cure patients with many diseases. Donor T cells can protect against recurrence of infection and disease, but some of these (alloreactive) T cells recognize patient tissues as foreign, causing graft-versus-host disease. Removing T cells from donor grafts before transplantation reduces graft-versus-host disease but increases infection and disease recurrence. Inactivation of alloreactive T cells by inducing tolerance to patient cells (anergization) before transplantation preserves beneficial donor T cell effects while reducing graft-versus-host disease. We show that this approach also results in expansion of regulatory T cells that specifically suppress alloreactive donor T cell responses in the recipient. In addition to reducing graft-versus-host disease, antigen-specific regulatory T cells generated with this strategy could suppress unwanted T cell responses that cause rejection of solid organ transplants and tissue damage in autoimmune disorders.