Unrelated umbilical cord blood transplantation (UCBT) exhibits a low risk of graft-versus-host-disease (GvHD) and has unique potent anti-virus and anti-leukemia effects. Anti-thymocyte globulin (ATG) in the conditioning regimen for UCBT is successful in reducing graft rejection and GvHD. Nevertheless, this beneficial effect of ATG coincides with its detrimental effect on immune reconstitution. The latter directly relates to a high incidence of viral infections and leukemia relapses. ATG has been used in transplant patients for over 30 years. In recent years, the knowledge on the mechanisms of action of ATG and its implementation in the UCBT setting has increased dramatically. Important data became available showing the highly variable pharmacokinetics (PK) of ATG and its consequence on outcome measures. Here, we review the effects of ATG on immune reconstitution and subsequent outcomes after UCBT, and describe the mechanisms causing these effects. We highlight the importance of optimizing ATG exposure before and after UCBT and discuss strategies to maintain the 'good' and overcome the 'bad and ugly' effects of ATG on UCBT outcome.