During the last 10 years, multiple studies using reduced-intensity (RI) conditioning followed by allogeneic stem cell transplantation (AlloSCT) have been reported in adult and, less so, pediatric recipients. RI AlloSCT allegedly eradicates malignant cells through a graft-versus-leukemia/graft-versus-tumor effect provided by alloreactive donor T lymphocytes, natural killer cells, or both. Various studies have clearly demonstrated a graft-versus-leukemia/graft-versus-tumor effect in hematologic malignancies and solid tumors. Acute short-term toxicity, including infection and organ decompensation after myeloablative conditioning therapy, can result in a significant incidence of early transplant-related mortality. More importantly, long-term late effects-including growth retardation, infertility, and secondary malignancies-are major complications after myeloablative conditioning therapy, especially in vulnerable children, who are more susceptible to these complications. Recent results comparing RI conditioning with myeloablative conditioning followed by HLA-matched sibling AlloSCT have demonstrated a significant reduction in use of blood products, risk of infections, transplant-related mortality, length of hospitalization, and feasibility of conditioning therapy in outpatient settings. Despite the success of RI AlloSCT, large prospective randomized multicenter studies are necessary to define the appropriate patient population, optimal conditioning regimens and pretransplantation immunosuppression, role of donor lymphocyte infusions, duration of hospitalization, overall survival, cost-benefit ratio, and differences in long-term effects to evaluate the role of RI AlloSCT more fully. We review the recent experience of RI AlloSCT in adults and children with both malignant and nonmalignant diseases and discuss the challenges for the future.