Graft-vs.-host disease (GvHD) is a major complication of allogenic hematopoietic stem-cell(HSC) transplantation. GvHD is associated with loss of endothelial thrombomodulin, but the relevance of this for the adaptive immune response to transplanted HSCs remains unknown. Here we show that the protease-activated protein C (aPC), which is generated by thrombomodulin, ameliorates GvHD aPC restricts allogenic T-cell activation via the protease activated receptor (PAR)2/PAR3 heterodimer on regulatory T-cells (Tregs, CD4+FOXP3+). Preincubation of pan T-cells with aPC prior to transplantation increases the frequency of Tregs and protects from GvHD. Preincubation of human T-cells (HLA-DR4-CD4+) with aPC prior to transplantation into humanized (NSG-AB°DR4) mice ameliorates graft-vs.-host disease. The protective effect of aPC on GvHD does not compromise the graft vs. leukaemia effect in two independent tumor cell models. Ex vivo preincubation of T-cells with aPC, aPC-based therapies, or targeting PAR2/PAR3 on T-cells may provide a safe and effective approach to mitigate GvHD.Graft-vs.-host disease is a complication of allogenic hematopoietic stem cell transplantation, and is associated with endothelial dysfunction. Here the authors show that activated protein C signals via PAR2/PAR3 to expand Treg cells, mitigating the disease in mice.