Regulatory T cells (T_regs) play a pivotal role in preventing autoimmunity, graft-versus-host disease (GVHD), and organ graft rejection. We previously showed that either germline or induced SH2 domain–containing inositol 5-phosphatase (SHIP) deficiency in the host abrogates GVHD. Here we show that SHIP deficiency promotes an increase of CD4⁺CD25⁺FoxP3⁺ T_regs and CD4⁺CD25⁻FoxP3⁺“naive” T cells in the periphery that display increased CD103, glucocorticoid-induced tumor necrosis factor receptor–related protein (GITR), OX40, and FcγRII/III expression. SHIP deficiency does not compromise T_reg function because SHIP-deficient CD3⁺CD4⁺CD25⁺ T_regs are as suppressive as wild-type (WT) CD3⁺CD4⁺CD25⁺ T_reg. Interestingly, like conventional T_regs, SHIP^−/− CD4⁺CD25⁻ T cells are unresponsive to major histocompatibility complex (MHC)–mismatched stimulators and suppress allogeneic responses by T cells in vitro. In addition, SHIP^−/− CD4⁺CD25⁻ T cells mediate reduced lethal GVHD on adoptive transfer to MHC-mismatched hosts. Furthermore, hosts with induced SHIP deficiency exhibit delayed rejection of MHC-mismatched cardiac grafts. Thus, SHIP is required for robust graft-versus-host and host-versus-graft responses by CD4⁺ T cell and limits their immunoregulatory capacity. These findings further define the immunosuppressive mechanisms that result from SHIP deficiency and provide additional justification for targeting SHIP in clinical transplantation.