Immune reconstitution appears to be delayed following myeloablative conditioning (MAC) and umbilical cord blood transplantation (UCBT) in paediatric recipients. Although reduced toxicity conditioning (RTC) versus MAC prior to allogeneic stem cell transplantation is associated with decreased transplant-related mortality, the effects of RTC versus MAC prior to UCBT on immune reconstitution and risk of graft-versus-host disease (GVHD) are unknown. In 88 consecutive paediatric recipients of UCBT, we assessed immune cell recovery and immunoglobulin reconstitution at days +100, 180 and 365 and analysed risk factors associated with acute and chronic GVHD. Immune cell subset recovery, immunoglobulin reconstitution, and the incidence of opportunistic infections did not differ significantly between MAC versus RTC groups. In a Cox model, MAC versus RTC recipients had significantly higher risk of grade II–IV acute GVHD [Hazard Ratio (HR) 6·1, P = 0·002] as did recipients of 4/6 vs. 5–6/6 HLA-matched UCBT (HR 3·1, P = 0·03), who also had significantly increased risk of chronic GVHD (HR 18·5, P = 0·04). In multivariate analyses, MAC versus RTC was furthermore associated with significantly increased transplant-related (Odds Ratio 26·8, P = 0·008) and overall mortality (HR = 4·1, P = 0·0001). The use of adoptive cellular immunotherapy to accelerate immune reconstitution and prevent and treat opportunistic infections and malignant relapse following UCBT warrants further investigation.