High-dose, posttransplantation cyclophosphamide (PTCy) is an effective strategy for preventing graft-versus-host disease (GVHD) after allogeneic blood or marrow transplantation (alloBMT). However, the mechanisms by which PTCy modulates alloimmune responses are not well understood. We studied early T cell reconstitution in patients undergoing alloBMT with PTCy and the effects of mafosfamide, a cyclophosphamide (Cy) analog, on CD4⁺ T cells in allogeneic mixed lymphocyte reactions (MLRs) in vitro. Patients exhibited reductions in naïve, potentially alloreactive conventional CD4⁺ T cells with relative preservation of memory CD4⁺Foxp3⁺ T cells. In particular, CD4⁺CD45RA⁻Foxp3^+hi effector regulatory T cells (T_regs) recovered rapidly after alloBMT and, unexpectedly, were present at higher levels in patients with GVHD. CD4⁺Foxp3⁺ T cells from patients and from allogeneic MLRs expressed relatively high levels of aldehyde dehydrogenase (ALDH), the major in vivo mechanism of Cy resistance. Treatment of MLR cultures with the ALDH inhibitor diethylaminobenzaldehyde reduced the activation and proliferation of CD4⁺ T cells and sensitized T_regs to mafosfamide. Finally, removing T_regs from peripheral blood lymphocyte grafts obviated PTCy’s GVHD-protective effect in a xenogeneic transplant model. Together, these findings suggest that T_reg resistance to Cy through expression of ALDH may contribute to the clinical activity of PTCy in preventing GVHD.