Hematopoietic stem cell homing and engraftment are crucial to transplantation efficiency, and clinical engraftment is severely compromised when donor-cell numbers are limiting. The peptidase CD26 (DPPIV/dipeptidylpeptidase IV) removes dipeptides from the amino terminus of proteins. We present evidence that endogenous CD26 expression on donor cells negatively regulates homing and engraftment. By inhibition or deletion of CD26, it was possible to increase greatly the efficiency of transplantation. These results suggest that hematopoietic stem cell engraftment is not absolute, as previously suggested, and indicate that improvement of bone marrow transplant efficiency may be possible in the clinic.