Peripheral blood stem cells (PBSCs) and bone marrow (BM) hematopoietic stem cells represent therapeutic alternatives in allogeneic hematopoietic cell transplantation. Randomized controlled trials and an individual patient data meta-analysis (IPDMA) have demonstrated a decreased risk of disease relapse and an increased risk of acute and chronic graft-versus-host disease (aGVHD, cGVHD) in patients receiving PBSCs compared with those receiving BM stem cells. Decision modeling provides quantitative integration of the risks and benefits associated with these alternative treatments, incorporates survival discounts for lower quality of life in patients with aGVHD or cGVHD and post-transplantation relapse, and allows sensitivity analyses for all model assumptions. We have constructed an externally validated Markov model to represent and analyze the decision to use PBSC or BM, estimating post-transplantation state transition probabilities (eg, GVHD and relapse) and quality-of-life discounts from the IPDMA and relevant literature; importantly, this IPDMA synthesized data from primarily adult patients treated with myeloablative (MA) conditioning regimens with T cell-replete matched sibling donors. In this setting, the model demonstrates the superiority of PBSC over BM in both overall and quality-adjusted life expectancy, with a 7-month advantage for PBSC. Sensitivity analyses support this conclusion through a range of values for each variable supported by the IPDMA and quality-of-life discounts, as supported by the literature. However, BM is the optimal strategy in conditions in which the 1-year relapse probability is < 5%. PBSC is the optimal stem cell source in terms of both overall and quality-adjusted life expectancy, except in conditions with a very low relapse probability, in which BM provides optimal outcomes.