Despite advances in immunosuppressive regimens, acute graft-versus-host disease remains a frequent complication of allogeneic hematopoietic cell transplantation. Pathogenic donor T cells are dependent on correct attachment of small GTPases to the cell membrane, mediated by farnesyl- or geranylgeranyl residues, which, therefore, constitute potential targets for graft-versus-host disease prophylaxis. A mouse model was used to study the impact of a farnesyl-transferase inhibitor and a geranylgeranyl-transferase inhibitor on acute graft-versus-host disease, anti-cytomegalovirus T-cell responses and graft-versus-leukemia activity. Treatment of mice undergoing allogeneic hematopoietic cell transplantation with farnesyl-transferase inhibitor and geranylgeranyl-transferase inhibitor reduced the histological severity of graft-versus-host disease and prolonged survival significantly. Mechanistically, farnesyl-transferase inhibitor and geranylgeranyl-transferase inhibitor treatment resulted in reduced alloantigen-driven expansion of CD4 T cells. In vivo treatment led to increased thymic cellularity and polyclonality of the T-cell receptor repertoire by reducing thymic graft-versus-host disease. These effects were absent when squalene production was blocked. The farnesyl-transferase inhibitor and geranylgeranyl-transferase inhibitor did not compromise CD8 function against leukemia cells or reconstitution of T cells that were subsequently responsible for anti-murine cytomegalovirus responses. In summary, we observed an immunomodulatory effect of inhibitors of farnesyl-transferase and geranylgeranyl-transferase on graft-versus-host disease, with enhanced functional immune reconstitution. In the light of the modest toxicity of farnesyl-transferase inhibitors such as tipifarnib in patients and the potent reduction of graft-versus-host disease in mice, farnesyl-transferase and geranylgeranyl-transferase inhibitors could help to reduce graft-versus-host disease significantly without having a negative impact on immune reconstitution.