Allogeneic hematopoietic cell transplantation (allo‐HCT) is increasingly being performed to treat patients with hematologic malignancies. However, separating the beneficial graft‐versus‐tumor (GVT) or graft‐versus‐leukemia effects from graft‐versus‐host disease (GVHD) has been difficult and remains a significant challenge toward improving therapeutic efficacy and reducing toxicity of allo‐HCT. GVHD is induced by donor T cells that also mediate potent anti‐tumor responses. However, despite the largely shared effector mechanisms, extensive animal studies have demonstrated the potential of dissociating the GVT effect from GVHD. Also in many clinical cases, long‐term remission was achieved following allo‐HCT, without significant GVHD. A better mechanistic understanding of the immunopathophysiology of GVHD and GVT effects may potentially help to improve allo‐HCT as well as maximize the benefit of GVT effects while minimizing GVHD. In this article, we review the role of IFN‐γ in regulation of alloresponses following allo‐HCT, with a focus on the mechanisms of how this cytokine may separate GVHD from GVT effects.