The major problems with busulfan/cyclophosphamide (Bu/Cy)-containing conditioning regimens are acute toxicities and graft failure. To decrease acute toxicities, we have prospectively evaluated a reduced intensity conditioning (RIC) regimen using targeted dosing of i.v. busulfan, fludarabine, and rabbit ATG (Bu/Flu/rATG) in children with diagnoses that historically would have been conditioned with Bu/Cy regimens. Nineteen pediatric patients were enrolled in the study. The donors included HLA-matched and one antigen-mismatched unrelated volunteers (n = 11), unrelated cord blood (n = 1), and related donors (n = 7). Four patients developed graft failure, which occurred between 1 and 8.5 months post transplant. All four of them underwent a second transplantation and 3/4 are alive without evidence of disease. The mean follow-up of living patients is 29.5 +/- s.d. 11 months. Despite excellent 2-year post-transplant overall survival (89 +/- s.d.7%) and event-free survival (74 +/- s.d.10%), the study was closed prematurely due to high graft failure rate (21%). Receiving a transplant from a mismatched unrelated donor was identified as a risk factor for graft failure. The Bu/Flu/rATG RIC regimen was very well tolerated, resulted in excellent overall survival, and provided sustained engraftment in patients undergoing transplant from matched sibling and unrelated donors. However, it did not provide sustained engraftment in the majority of children with nonmalignancies undergoing mismatched unrelated donor transplants.