BACKGROUND: The immune suppressive tumor microenvironment (TME) that inhibits T cell infiltration, survival, and antitumor activity has posed a major challenge for developing effective immunotherapies for solid tumors. Chimeric antigen receptor (CAR)-engineered T cell therapy has shown unprecedented clinical response in treating patients with hematological malignancies, and intense investigation is underway to achieve similar responses with solid tumors. Immunologically cold tumors, including prostate cancers, are often infiltrated with abundant tumor-associated macrophages (TAMs), and infiltration of CD163+ M2 macrophages correlates with tumor progression and poor responses to immunotherapy. However, the impact of TAMs on CAR T cell activity alone and in combination with TME immunomodulators is unclear. METHODS: To model this in vitro, we utilized a novel co-culture system with tumor cells, CAR T cells, and polarized M1 or M2 macrophages from CD14+ peripheral blood mononuclear cells collected from healthy human donors. Tumor cell killing, T cell activation and proliferation, and macrophage phenotypes were evaluated by flow cytometry, cytokine production, RNA sequencing, and functional blockade of signaling pathways using antibodies and small molecule inhibitors. We also evaluated the TME in humanized mice following CAR T cell therapy for validation of our in vitro findings. RESULTS: We observed inhibition of CAR T cell activity with the presence of M2 macrophages, but not M1 macrophages, coinciding with a robust induction of programmed death ligand-1 (PD-L1) in M2 macrophages. We observed similar PD-L1 expression in TAMs following CAR T cell therapy in the TME of humanized mice. PD-L1, but not programmed cell death protein-1, blockade in combination with CAR T cell therapy altered phenotypes to more M1-like subsets and led to loss of CD163+ M2 macrophages via interferon-γ signaling, resulting in improved antitumor activity of CAR T cells. CONCLUSION: This study reveals an alternative mechanism by which the combination of CAR T cells and immune checkpoint blockade modulates the immune landscape of solid tumors to enhance therapeutic efficacy of CAR T cells.