Immune surveillance by T helper type 1 (T(H)1) cells is not only critical for the host response to tumors and infection, but also contributes to autoimmunity and graft-versus-host disease (GVHD) after transplantation. The inhibitory molecule programmed death ligand 1 (PDL1) has been shown to anergize human T(H)1 cells, but other mechanisms of PDL1-mediated T(H)1 inhibition such as the conversion of T(H)1 cells to a regulatory phenotype have not been well characterized. We hypothesized that PDL1 may cause T(H)1 cells to manifest differentiation plasticity. Conventional T cells or irradiated K562 myeloid tumor cells overexpressing PDL1 converted TBET(+) T(H)1 cells into FOXP3(+) regulatory T (T(reg)) cells in vivo, thereby preventing human-into-mouse xenogeneic GVHD (xGVHD). Either blocking PD1 expression on T(H)1 cells by small interfering RNA targeting or abrogation of PD1 signaling by SHP1/2 pharmacologic inhibition stabilized T(H)1 cell differentiation during PDL1 challenge and restored the capacity of T(H)1 cells to mediate lethal xGVHD. PD1 signaling therefore induces human T(H)1 cells to manifest in vivo plasticity, resulting in a T(reg) phenotype that severely impairs cell-mediated immunity. Converting human T(H)1 cells to a regulatory phenotype with PD1 signaling provides a potential way to block GVHD after transplantation. Moreover, because this conversion can be prevented by blocking PD1 expression or pharmacologically inhibiting SHP1/2, this pathway provides a new therapeutic direction for enhancing T cell immunity to cancer and infection.