Allogeneic hematopoietic stem cell transplantation (HSCT) can eradicate chemorefractory leukemia through the graft-versus-leukemia (GVL) activity of donor T cells. However, the clinical success of allo-HSCT is limited by the graft-versus-host disease (GVHD) activity of donor T cells. We have reported previously that donor bone marrow precursors of plasmacytoid dendritic cells (pre-pDCs) can activate donor T cells toward T-helper 1 immune polarization in murine allogeneic HSCT. To optimize the GVL activity of these activated donor T cells and limit their graft versus host activity, we engineered the cellular constituents of an allogeneic hematopoietic stem cell graft with highly purified hematopoietic stem cells, T cells, and pre-pDCs and studied their GVL and GVHD activities in a murine model of allogeneic HSCT. Transplanted donor pre-pDCs expanded in vivo for 2 weeks after transplant, and they markedly augmented the activation and GVL activity of donor T cells while attenuating their GVHD activity, leading to an improved therapeutic index. Bidirectional signaling between donor T cells and donor pDCs with IFN-γ synthesis by donor T cells inducing indoleamine 2,3-dioxygenase synthesis by donor pDCs limited GVHD by altering the balance between donor T-reg and inflammatory T cells. Manipulating the content of donor DC precursors in allogeneic HSCT is a novel method to optimize the balance between GVL and GVHD.