Abstract Transplantation is an effective treatment of many clinical disorders, but the mechanisms that regulate immunological tolerance are uncertain and remain central to improving patient outcome. Hemopoietic stem cell transplantation (SCT) often establishes “mixed chimerism” in which immune cells from both the donor and patient coexist in vivo in a setting of immunological tolerance. We studied immune function in 69 patients within 2 months following SCT; 37 were fully donor and 32 displayed mixed chimerism. The proportion of T regulatory (Treg) cells was increased during mixed chimerism and comprised equal numbers of donor and host-derived regulatory cells. This was associated with a tolerogenic PD-L1+ profile on dendritic cells. Importantly, effector T cells from patients with mixed chimerism exhibited reduced cytotoxicity against host target cells in vitro, but this was restored following depletion of CD4+ Treg cells. These data show that Treg cells play a major role in sustaining immunological tolerance during mixed chimerism. These insights should help to guide novel interventions to improve clinical transplantation.