When compared with BMT, umbilical cord blood transplantation (UCBT) is associated with a lower rate of engraftment and delayed hematological/immunological recovery. This leads to increased risk of TRM in the early post transplantation period due to infection. Acute GVHD, although occurring less frequently in UCBT compared with BMT, is also significantly associated with increased rate of early TRM. BM MSCs are known to support normal in vivo hematopoiesis, and co-transplantation of MSCs has been shown to enhance engraftment of human cord blood hematopoietic cells in nonobese diabetic/SCID mice. In 13 children with hematological disorders (median age 2 years) undergoing UCBT, we cotransplanted paternal, HLA-disparate MSCs with the aim of improving hematological recovery and reducing rejection. We observed no differences in hematological recovery or rejection rates compared with 39 matched historical controls, most of whom received G-CSF after UCBT. However, the rate of grade III and IV acute GVHD was significantly decreased in the study cohort when compared with controls (P ¼ 0.05), thus resulting in reduced early TRM. Although these data do not support the use of MSCs in UCBT to support hematopoietic engraftment, they suggest that MSCs, possibly because of their immunosuppressive effect, may abrogate life-threatening acute GVHD and reduce early TRM.