STAT3 deficiency (STAT3^–/–) in donor T cells prevents graft-versus-host disease (GVHD), but the impact on graft-versus-leukemia (GVL) activity and mechanisms of GVHD prevention remains unclear. Here, using murine models of GVHD, we show that STAT3^–/– donor T cells induced only mild reversible acute GVHD while preserving GVL effects against nonsusceptible acute lymphoblastic leukemia (ALL) cells in a donor T cell dose–dependent manner. GVHD prevention depended on programmed death ligand 1/programmed cell death protein 1 (PD-L1/PD-1) signaling. In GVHD target tissues, STAT3 deficiency amplified PD-L1/PD-1 inhibition of glutathione (GSH)/Myc pathways that regulate metabolic reprogramming in activated T cells, with decreased glycolytic and mitochondrial ATP production and increased mitochondrial ROS production and dysfunction, leading to tissue-specific deletion of host-reactive T cells and prevention of GVHD. Mitochondrial STAT3 deficiency alone did not reduce GSH expression or prevent GVHD. In lymphoid tissues, the lack of host-tissue PD-L1 interaction with PD-1 reduced the inhibition of the GSH/Myc pathway despite reduced GSH production caused by STAT3 deficiency and allowed donor T cell functions that mediate GVL activity. Therefore, STAT3 deficiency in donor T cells augments PD-1 signaling–mediated inhibition of GSH/Myc pathways and augments dysfunction of T cells in GVHD target tissues while sparing T cells in lymphoid tissues, leading to prevention of GVHD while preserving GVL effects.