Graft-vs-host disease (GVHD) is the leading cause of treatment-related death in allogeneic bone marrow (BM) transplantation. Immunosuppressive strategies to control GVHD are only partially effective and often lead to life-threatening infections. We previously showed that engraftment of MHC-mismatched BM is enhanced and GVHD abrogated in recipients homozygous for a germline SHIP mutation. In this study, we report the development of a genetic model in which SHIP deficiency can be induced in adult mice. Using this model, we show that the induction of SHIP deficiency in adult mice leads to a rapid and significant expansion of myeloid suppressor cells in peripheral lymphoid tissues. Consistent with expansion of myeloid suppressor cells, splenocytes and lymph node cells from adult mice with induced SHIP deficiency are significantly compromised in their ability to prime allogeneic T cell responses. These results demonstrate that SHIP regulates homeostatic signals for these immunoregulatory cells in adult physiology. Consistent with these findings, induction of SHIP deficiency before receiving a T cell-replete BM graft abrogates acute GVHD. These findings indicate strategies that target SHIP could increase the efficacy and utility of allogeneic BM transplantation, and thereby provide a curative therapy for a wide spectrum of human diseases.