Allogeneic hematopoietic stem cell transplantation (allo-HSCT) is a potentially curative therapy for hematological malignancies. However, graft-versus-host disease (GVHD) and relapse after allo-HSCT remain major impediments. Chimeric antigen receptors (CARs) direct tumor cell recognition of adoptively transferred T cells.1–5 CD19 is an attractive CAR target, expressed in most B cell malignancies as well as normal B cells.6,7 Clinical trails using autologous CD19-targeted T cells have shown remarkable outcomes in various B cell malignancies8–15. The use of allogeneic CAR T cells poses a concern of increased GVHD, which however has not been reported in selected patients infused with donor-derived CD19-CAR T cells after allo-HSCT.16,17 To understand the mechanism whereby allogeneic CD19-CAR T cells may mediate anti-lymphoma activity without significant GVHD, we studied donor-derived CD19-CAR T cells in allo-HSCT and lymphoma models in mice. We demonstrate that alloreactive T cells expressing CD28-costimulated CD19-CARs experienced enhanced T cell stimulation, resulting in progressive loss of effector function and proliferative potential, clonal deletion, and significantly decreased GVHD. Concurrently, other CAR T cells present in bulk donor T cell populations retained their anti-lymphoma activity consistent with the requirement for engaging both the TCR and the CAR to accelerate T cell exhaustion. In contrast, first generation and 4-1BB-costimulated CARs increased GVHD. These findings could explain reduced risk of GVHD with cumulative TCR and CAR signaling.