Failure of a specialized population of corneal epithelial stem cells found in the peripheral cornea and limbus results in ocular surface disease, which may be amenable to treatment by transplantation of limbal tissue. This study was designed to investigate donor limbal stem cell allograft survival in rabbits with ocular surface disease. Rabbits underwent corneal epithelial debridement and limbal ablation to induce ocular surface disease and were then treated by limbal stem cell allotransplantation, by allotransplantation plus topical steroid, or by topical steroid only (n = 7 for each group). Donors and recipients were sex mismatched. Recipients were followed for up to 5 months. Outcome was assessed by daily slit-lamp examination, weekly impression cytology and photographic record, end-point sex chromatin and fluorescent cell tracer analyses, histology, and immunohistochemistry. In no case was a completely normal ocular surface regained, but some animals that received grafts plus corticosteroids fared best by all criteria used. In the absence of immunosuppression, graft hemorrhagia (believed to be a manifestation of graft rejection) occurred within the first month, the cornea became resurfaced with conjunctiva-derived cells, and no donor cells survived centrally in the long term. Topical corticosteroids reduced the number and severity of these episodes significantly, and were associated with survival of some donor-derived cells in the central cornea of some grafted animals. Thus, rabbit limbal stem cell allografts appeared to undergo rejection, which could be modified by immunosuppression, but useful regeneration of the ocular surface occurred only where rejection was circumvented.