CD4+CD25+Foxp3+ Tregs have an indispensable role in the maintenance of tolerance after allogeneic HSC transplantation (HSCT). Patients with chronic graft-versus-host disease (GVHD) have fewer circulating Tregs, but the mechanisms that lead to this deficiency of Tregs after HSCT are not known. Here, we analyzed reconstitution of Tregs and conventional CD4+ T cells (Tcons) in patients who underwent allogeneic HSCT after myeloablative conditioning. Following transplant, thymic generation of naive Tregs was markedly impaired, and reconstituting Tregs had a predominantly activated/memory phenotype. In response to CD4+ lymphopenia after HSCT, Tregs underwent higher levels of proliferation than Tcons, but Tregs undergoing homeostatic proliferation also showed increased susceptibility to Fas-mediated apoptosis. Prospective monitoring of CD4+ T cell subsets revealed that Tregs rapidly expanded and achieved normal levels by 9 months after HSCT, but Treg levels subsequently declined in patients with prolonged CD4+ lymphopenia. This resulted in a relative deficiency of Tregs, which was associated with a high incidence of extensive chronic GVHD. These studies indicate that CD4+ lymphopenia is a critical factor in Treg homeostasis and that prolonged imbalance of Treg homeostasis after HSCT can result in loss of tolerance and significant clinical disease manifestations.