Dendritic-like leukemia cells (DLLC) originating from leukemic cells could potentially induce a T cell-mediated anti-leukemia immune response. It has been demonstrated that B7-H1, a newly identified homologue of CD80/CD86, is abundant in human carcinomas and dendritic cells (DC), can exert co-stimulatory and immune regulatory functions. We demonstrated that B7-H1 was significantly expressed on AML cells and was strongly enhanced after differentiation to DLLC. Blockade of B7-H1 expressed on DLLC results in increased T cell proliferation and Th1 cytokine production, and decreased Th2 cytokine production. Importantly, autologous CTLs induced by DLLC treated with B7-H1 mAb showed significantly increased specific cytotoxcity against AML blasts. We further demonstrated that a significant decrease in IL-12 production, increase in IL-10 production by DLLC, and an increased CD4(+)CD25(+)Foxp3(+) T regulatory population lead to the defective T cell immune response that is induced by B7-H1 up-regulation on DLLC. Our data suggest that up-regulated B7-H1 on DLLC acts as a strong inhibitor of anti-leukemia T cell response, and that blockade of B7-H1 can improve DLLC-mediated anti-leukemia immunity.