Keratinocyte growth factor (KGF) promotes epithelial cell proliferation and survival. Recombinant human KGF, also known as palifermin, protects epithelial cells from injury induced by chemicals, irradiation and acute murine graft‐versus‐host disease (GVHD). Findings from our studies and others have shown that palifermin also has immunomodulatory properties. In a model of acute GVHD, we showed that it shifts the immune response from one in which Th1 cytokines dominate to mixed Th1 and Th2 cytokine profile. Using the DBA/2→(C57BL/6 × DBA/2)F1‐hybrid model of chronic, systemic lupus erythematosus‐like GVHD, we showed that palifermin treatment is associated with higher levels of Th2 cytokines, the production of anti‐nuclear antibodies, cryoglobulinemia and the development of more severe pathological changes in the kidney. The aim of our current study was to gain a better understanding of the immunobiology of KGF by further characterizing the palifermin‐mediated effects in this model of chronic GVHD. Because the pathological changes we observed resemble those seen in thymic stromal lymphopoietin (TSLP) transgenic mice, we had originally hypothesized that palifermin might augment TSLP levels. Surprisingly, we did not observe an increase in thymic TSLP mRNA expression in palifermin‐treated recipients. We did, however, observe some differences in the percentages of CD4+CD25+Foxp3+ regulatory T cells in the spleen at some time points in palifermin‐treated recipients. Most importantly, we found that TGFβ levels were higher in palifermin‐treated recipients early in the GVH reaction, raising the possibility that KGF might indirectly induce the development of fibrosis and glomerulonephritis through a pathway involving TGFβ.