Allogeneic bone marrow transplantation (BMT) under costimulation blockade allows induction of mixed chimerism and tolerance without global T cell depletion. The mildest such protocols, however, require clinically impracticable BM doses. The successful use of mobilized peripheral blood stem cells (PBSC) instead of BM in such regimens would provide a substantial advance, allowing transplantation of higher doses of hematopoietic donor cells. We thus transplanted fully allogeneic murine granulocyte colony-stimulating-factor (G-CSF) mobilized PBSC under costimulation blockade (anti-CD154 and CTLA4Ig) and non-myeloablative total body irradiation (TBI). Unexpectedly, PBSC did not engraft, even when very high cell doses were used. Paradoxically, T cells contained in the donor PBSC triggered rejection of the transplanted donor cells. Donor-specific transfusion and transient immunosuppression prevented PBSC-triggered rejection and mixed chimerism and tolerance were achieved, but graft-versus-host disease (GVHD) was uniformly present. The combination of in vivo T cell depletion with costimulation blockade prevented rejection and GVHD. Thus, regimens based on costimulation blockade alone do not induce chimerism and tolerance without unacceptable toxicity when allogeneic PBSC are transplanted instead of BMC but require the addition of global T cell depletion for their success.