Pomalidomide (Pom) is an immunomodulatory drug that has efficacy against Kaposi's sarcoma, a tumor caused by Kaposi's sarcoma-associated herpesvirus (KSHV). Pom also induces direct cytotoxicity in primary effusion lymphoma (PEL), a B-cell malignancy caused by KSHV, in part through downregulation of IRF4, cMyc, and CK1α as a result of its interaction with cereblon, a cellular E3 ubiquitin ligase. Additionally, Pom can reverse KSHV-induced downregulation of MHCI and co-stimulatory immune surface molecules ICAM-1 and B7-2 on PELs. Here, we show for the first time that Pom-induced increases in ICAM-1 and B7-2 on PEL cells lead to an increase in both T-cell activation and NK-mediated cytotoxicity against PEL. The increase in T-cell activation can be prevented by blocking ICAM-1 and/or B7-2 on the PEL cell surface, suggesting that both ICAM-1 and B7-2 are important for T-cell co-stimulation by PELs. To gain mechanistic insights into Pom's effects on surface markers, we generated Pom-resistant (PomR) PEL cells, which showed about 90% reduction in cereblon protein level and only minimal changes in IRF4 and cMyc upon Pom treatment. Pom no longer upregulated ICAM-1 and B7-2 on the surface of PomR cells, nor did it increase T-cell and NK-cell activation. Cereblon-knockout cells behaved similarly to the pomR cells upon Pom-treatment, suggesting that Pom's interaction with cereblon is necessary for these effects. Further mechanistic studies revealed PI3K signaling pathway as being important for Pom-induced increases in these molecules. These observations provide a rationale for the study of Pom as therapy in treating PEL and other KSHV-associated tumors.