Although many human cancers such as melanoma express tumor antigens recognized by T cells, host immune responses often fail to control tumor growth for as yet unexplained reasons. Here, we found a strong association between melanocyte expression of B7-H1 (PD-L1), an immune-inhibitory molecule, and the presence of tumor-infiltrating lymphocytes (TILs) in human melanocytic lesions: 98% of B7-H1+ tumors were associated with TILs compared with only 28% of B7-H1− tumors. Indeed, B7-H1+ melanocytes were almost always localized immediately adjacent to TILs. B7-H1/TIL colocalization was identified not only in melanomas but also in inflamed benign nevi, indicating that B7-H1 expression may represent a host response to tissue inflammation. Interferon-γ, a primary inducer of B7-H1 expression, was detected at the interface of B7-H1+ tumors and TILs, whereas none was found in B7-H1− tumors. Therefore, TILs may actually trigger their own inhibition by secreting cytokines that drive tumor B7-H1 expression. Consistent with this hypothesis, overall survival of patients with B7-H1+ metastatic melanoma was significantly prolonged compared with that of patients with B7-H1− metastatic melanoma. Therefore, induction of the B7-H1/PD-1 pathway may represent an adaptive immune resistance mechanism exerted by tumor cells in response to endogenous antitumor activity and may explain how melanomas escape immune destruction despite endogenous antitumor immune responses. These observations suggest that therapies that block this pathway may benefit patients with B7-H1+ tumors.