Regulatory T cells (T(regs)) play a pivotal role in preventing autoimmunity, graft-versus-host disease (GVHD), and organ graft rejection. We previously showed that either germline or induced SH2 domain-containing inositol 5-phosphatase (SHIP) deficiency in the host abrogates GVHD. Here we show that SHIP deficiency promotes an increase of CD4(+)CD25(+)FoxP3(+) T(regs) and CD4(+)CD25(-)FoxP3(+)"naive" T cells in the periphery that display increased CD103, glucocorticoid-induced tumor necrosis factor receptor-related protein (GITR), OX40, and FcgammaRII/III expression. SHIP deficiency does not compromise T(reg) function because SHIP-deficient CD3(+)CD4(+)CD25(+) T(regs) are as suppressive as wild-type (WT) CD3(+)CD4(+)CD25(+) T(reg). Interestingly, like conventional T(regs), SHIP(-/-) CD4(+)CD25(-) T cells are unresponsive to major histocompatibility complex (MHC)-mismatched stimulators and suppress allogeneic responses by T cells in vitro. In addition, SHIP(-/-) CD4(+)CD25(-) T cells mediate reduced lethal GVHD on adoptive transfer to MHC-mismatched hosts. Furthermore, hosts with induced SHIP deficiency exhibit delayed rejection of MHC-mismatched cardiac grafts. Thus, SHIP is required for robust graft-versus-host and host-versus-graft responses by CD4(+) T cell and limits their immunoregulatory capacity. These findings further define the immunosuppressive mechanisms that result from SHIP deficiency and provide additional justification for targeting SHIP in clinical transplantation.