The lung is a prototypic organ that was evolved to reduce immunopathology during the immune response to potentially hazardous endogenous and exogenous antigens. In this study, we show that donor CD4⁺ T cells transiently induced expression of indoleamine 2,3-dioxygenase (IDO) in lung parenchyma in an IFN-γ–dependent manner early after allogeneic hematopoietic stem cell transplantation (HSCT). Abrogation of host IDO expression by deletion of the IDO gene or the IFN-γ gene in donor T cells or by FK506 treatment resulted in acute lethal pulmonary inflammation known as idiopathic pneumonia syndrome (IPS). Interestingly, IL-6 strongly induced IDO expression in an IFN-γ–independent manner when deacetylation of STAT3 was inhibited. Accordingly, a histone deacetylase inhibitor (HDACi) could reduce IPS in the state where IFN-γ expression was suppressed by FK506. Finally, l-kynurenine produced by lung epithelial cells and alveolar macrophages during IPS progression suppresses the inflammatory activities of lung epithelial cells and CD4⁺ T cells through the aryl hydrocarbon receptor pathway. Taken together, our results reveal that IDO is a critical regulator of acute pulmonary inflammation and that regulation of IDO expression by HDACi may be a therapeutic approach for IPS after HSCT.