Abstract Immunopathology and intestinal stem cell (ISC) loss in the gastrointestinal (GI) tract is the prima facie manifestation of graft-versus-host disease (GVHD) and is responsible for significant mortality after allogeneic bone marrow transplantation (BMT). Approaches to prevent GVHD to date focus on immune suppression. Here, we identify interferon-λ (IFN-λ; interleukin-28 [IL-28]/IL-29) as a key protector of GI GVHD immunopathology, notably within the ISC compartment. Ifnlr1−/− mice displayed exaggerated GI GVHD and mortality independent of Paneth cells and alterations to the microbiome. Ifnlr1−/− intestinal organoid growth was significantly impaired, and targeted Ifnlr1 deficiency exhibited effects intrinsic to recipient Lgr5+ ISCs and natural killer cells. PEGylated recombinant IL-29 (PEG-rIL-29) treatment of naive mice enhanced Lgr5+ ISC numbers and organoid growth independent of both IL-22 and type I IFN and modulated proliferative and apoptosis gene sets in Lgr5+ ISCs. PEG-rIL-29 treatment improved survival, reduced GVHD severity, and enhanced epithelial proliferation and ISC-derived organoid growth after BMT. The preservation of ISC numbers in response to PEG-rIL-29 after BMT occurred both in the presence and absence of IFN-λ–signaling in recipient natural killer cells. IFN-λ is therefore an attractive and rapidly testable approach to prevent ISC loss and immunopathology during GVHD.