Contemporary approaches for vaccination and immunotherapy are often capable of eliciting strong T-cell responses against tumor antigens. However, such responses are not parallel to clinical tumor regression. The development of evasion mechanisms within tumor microenvironment may be responsible for poor therapeutic responses. We report here that constitutive or inducible expression of B7-H1, a B7 family molecule widely expressed by cancers, confers resistance to therapeutic anti-CD137 antibody in mice with established tumors. The resistance is accompanied with failure of antigen-specific CD8+ CTLs to destroy tumor cells without impairment of CTL function. Blockade of B7-H1 or PD-1 by specific monoclonal antibodies could reverse this resistance and profoundly enhance therapeutic efficacy. Our findings support that B7-H1/PD-1 forms a molecular shield to prevent destruction by CTLs and implicate new approaches for immunotherapy of human cancers.