Infections and acute graft‐versus‐host disease (aGVHD) are major causes of treatment‐related mortality and morbidity following allogeneic haematopoietic stem cell transplantation (HSCT). Both complications depend on reconstitution of the T‐lymphocyte population based on donor T cells. Although it is well established that Interleukin‐7 (IL‐7) is a cytokine essential for de novo T cell development in the thymus and homoeostatic peripheral expansion of T cells, associations between circulating levels of IL‐7 and T cell reconstitution following HSCT have not been investigated previously. We prospectively measured IL‐7 levels in 81 patients undergoing myeloablative HSCT with either sibling donor or an unrelated donor. Plasma IL‐7 levels peaked at day +7 post‐transplant (1.3–82.4 pg/ml), at the time of maximal lymphopaenia. In multivariate analysis, peak levels of IL‐7 were significantly higher in patients treated with anti‐thymocyte globulin (ATG) compared with those not treated with ATG (P = 0.0079). IL‐7 levels at day +7 were negatively associated with T cell counts at day +30 to +60 (at day +60: CD3+: β = −10.6 × 106 cells/l, P = 0.0030; CD8+: β = −8.4 × 106 cells/l, P = 0.061; CD4+: β = −2.1 × 106 cells/l, P = 0.062) in multivariate analyses. In adults, high IL‐7 levels were associated with increased risk of grade II‐IV aGVHD (OR = 5.4, P = 0.036) and reduced overall survival (P = 0.046). The present data indicate that high plasma levels of IL‐7 in the early post‐transplant period are predictive for slow T cell reconstitution, increased risk of aGVHD and increased mortality following HSCT.