Acute graft-vs-host disease (GVHD) is a major obstacle to safe allogeneic hematopoietic stem cell transplantation (HSCT), leading to a significant morbidity and mortality. GVHD occurs when transplanted donor T lymphocytes react to foreign host cells. It causes a wide variety of host tissue injuries. This review focuses on the pathobiological basis, clinical aspects, and current management strategies of acute GVHD. Afferent phase of acute GVHD starts with myeloablative conditioning, i.e., before the infusion of the graft. Total-body irradiation (TBI) or high-dose chemotherapy regimens cause extensive damage and activation in host tissues, which release inflammatory cytokines and enhance recipient major histocompatibility complex (MHC) antigens. Recognition of the foreign host antigens by donor T cells and activation, stimulation, and proliferation of T cells is crucial in the afferent phase. Effector phase of acute GVHD results in direct and indirect damage to host cells. The skin, gastrointestinal tract, and liver are major target organs of acute GVHD. Combination drug prophylaxis in GVHD is essential in all patients undergoing allogeneic HSCT. Steroids have remained the standard for the treatment of acute GVHD. Several clinical trials have evaluated monoclonal antibodies or receptor antagonist therapy for steroid-resistant acute GVHD, with different successes in a variety of settings. There are some newer promising agents like mycophenolate mofetil, glutamic acid-lysine-alanine-tyrosine (GLAT), rapamycin, and trimetrexate currently entering in the clinical studies, and other agents are in development. Future experimental and clinical studies on GVHD will shed further light on the better understanding of the disease pathobiology and generate the tools to treat malignant disorders with allogeneic HSCT with specific graft-vs-tumor effects devoid of GVHD.