Background: In advanced cancers, patients’ prognostic perceptions influence their medical decisions. However, little is known about how patients with hematologic malignancies undergoing HCT and their family caregivers (FC) understand their prognosis. We examined prognostic perception in these patients during hospitalization for HCT and its relationship with QOL and mood. Methods: We conducted a longitudinal study of patients (and FC) hospitalized for HCT. At baseline (6 days pre-HCT), we used a 10-item questionnaire to measure patients’ and FC information preferences, and perception of prognosis. Using 2-items, we also asked oncologists regarding the patients’ prognosis. At day-6, day+1, day+8 of HCT, we assessed QOL (Functional Assessment of Cancer Therapy-Bone Marrow Transplantation FACT-BMT), and mood (Hospital Anxiety and Depression Scale). We examined the relationship between patients’ prognostic perception and their QOL and mood during hospitalization for HCT using multivariable linear mixed models. Results: We enrolled 97% of consecutively eligible patients undergoing autologous (n=30), myeloablative (n=30) or reduced intensity (n=30) allogeneic HCT. Most patients (80/90, 88.9%) and FC (41/47, 87.1%) believed that it is ‘extremely’ or ‘very’ important to know about prognosis. However, the majority of patients (66/85, 77.6%) and FC (33/46, 71.7%) reported an inaccurate and more optimistic perception of the patients’ prognosis compared to the oncologist (P < 0.0001). Patients with accurate prognostic understanding reported lower QOL (P = 0.03) and worse depressive symptoms (P = 0.04) with a steeper increase in depression (P = 0.006) over time compared to patients with an inaccurate optimistic prognostic perception. Conclusions: The majority of patients and FC reported inaccurate and more optimistic perception of prognosis compared with the oncologist. Patients with an accurate perception of their prognosis had lower QOL, higher depression, and a steeper increase in depression during hospitalization for HCT. Interventions are needed to improve prognostic understanding while providing adequate psychosocial support during HCT.