Chronic graft-versus-host disease (cGVHD) remains the major cause of late morbidity and mortality after allogeneic hematopoietic stem cell transplantation (HSCT). However, only a few studies specifically focused on children, and little information is available on the antileukemic effect of cGVHD and its impact on disease-free survival (DFS) in children. We retrospectively analyzed 696 children given allogeneic HSCT for malignant (n = 450) or nonmalignant (n = 246) diseases. The donor was an HLA-identical sibling in 461 cases and an alternative donor in 235. Bone marrow was the stem cell source in 647 cases, peripheral blood in 17, and cord blood (CB) in 32. cGVHD developed in 173 children (25%) at a median of 116 days after HSCT. Three-year cGVHD probability was 27%. In multivariate analysis, variables predicting cGVHD were donor and recipient age, grade II to IV acute GVHD, female donor for male recipient, diagnosis of malignancy, and use of total body irradiation; CB transplants had a very low risk of cGVHD (RR = 0.07, P =.0001). cGVHD occurrence increased transplant-related mortality (P <.05). Nevertheless, in hematologic malignancies, patients with cGVHD had a reduced relapse probability compared with children without cGVHD (16% +/- 3% versus 39% +/- 3%, P =.0001) and a better DFS (68% +/- 4% versus 54% +/- 3%, P =.01). The antileukemic effect of cGVHD was observed mainly in patients with acute lymphoblastic leukemia (ALL). This study provides novel data on cGVHD in childhood. Use of CB stem cells and preparative regimens without radiotherapy may prevent its development. In patients affected by ALL, cGVHD was associated with a strong graft-versus-leukemia effect, improving DFS.