Impaired host defense post-bone marrow transplant (BMT) is related to overproduction of prostaglandin E₂ (PGE₂) by alveolar macrophages (AMs). We show AMs post-BMT overproduce granulocyte-macrophage colony stimulating factor (GM-CSF) whereas GM-CSF in lung homogenates is impaired both at baseline and in response to infection post-BMT. Homeostatic regulation of GM-CSF may occur by hematopoietic/structural cell crosstalk. To determine whether AM overproduction of GM-CSF influenced immunosuppression post-BMT, we compared mice which received BMT from wild-type donors (control BMT) or mice that received BMT from GM-CSF-/- donors (GM-CSF-/- BMT) to untransplanted mice. GM-CSF-/- BMT mice were less susceptible to pneumonia with Pseudomonas aeruginosa compared to control BMT mice and showed anti-bacterial responses equal or better than untransplanted mice. GM-CSF-/- BMT AMs displayed normal phagocytosis and a trend towards enhanced bacterial killing. Surprisingly, AMs from GM-CSF-/- BMT mice overproduced PGE₂, but expression of the inhibitory EP2 receptor was diminished. As a consequence of decreased EP2 receptor expression, we found diminished accumulation of cyclic adenosine monophosphate (cAMP) in response to PGE₂ stimulation in GM-CSF-/-BMT AMs compared to control BMT AMs. In addition, GM-CSF-/- BMT AMs retained cysteinyl leukotriene production and normal tumor necrosis factor (TNF)- response compared to AMs from control BMT mice. GM-CSF-/- BMT neutrophils also showed improved bacterial killing. While genetic ablation of GM-CSF in hematopoietic cells post-BMT improved host defense, transplantation of wild-type BM into GM-CSF-/- recipients demonstrated that parenchymal cell-derived GM-CSF is necessary for effective innate immune responses post-BMT. These results highlight the complex regulation of GM-CSF and innate immunity post-BMT.