Posttranscriptional modification of histones by methylation plays an important role in regulating Ag-driven T-cell responses. We have recently drawn correlations between allogeneic T-cell responses and the histone methyltransferase Ezh2, which catalyzes histone H3 lysine 27 trimethylation. The functional relevance of Ezh2 in T-cell alloimmunity remains unclear. Here, we identify a central role of Ezh2 in regulating allogeneic T-cell proliferation, differentiation, and function. Conditional loss of Ezh2 in donor T cells inhibited graft-versus-host disease (GVHD) in mice after allogeneic bone marrow (BM) transplantation. Although Ezh2-deficient T cells were initially activated to proliferate upon alloantigenic priming, their ability to undergo continual proliferation and expansion was defective during late stages of GVHD induction. This effect of Ezh2 ablation was largely independent of the proapoptotic molecule Bim. Unexpectedly, as a gene silencer, Ezh2 was required to promote the expression of transcription factors Tbx21 and Stat4. Loss of Ezh2 in T cells specifically impaired their differentiation into interferon (IFN)-γ-producing effector cells. However, Ezh2 ablation retained antileukemia activity in alloreactive T cells, leading to improved overall survival of the recipients. Our findings justify investigation of modulating Ezh2 as a therapeutic strategy for the treatment of GVHD and other T cell-mediated inflammatory disorders.