Engagement of programmed death-1 (PD-1) with its two ligands [programmed death ligand-1 (PD-L1) and PD-L2] has been associated with the suppression of tumor-reactive T cells; however, the underlying mechanism for this T-cell dysfunction is not clear. We hypothesized that PD-1 and PD-L1 signals are, in part, responsible for squamous cell carcinoma (SCC) escape from immune antitumor regulation by modulation of the tumor environment. In the present study, we used a multistage model of SCC to examine the role of PD-1/PD-L1 activation during tumor development. Tumor sites presented an increased percentage of CD4(+) and CD8(+) T cells expressing PD-1 when compared with non-tumorigenic control mice, whereas the expression of PD-L1 was particularly increased in F4/80(+) macrophages in tumor sites. Further, the systemic immune neutralization of PD-1 resulted in a decreased number and delayed incidence rate of papillomas followed by a differential expression of cytokeratins, suggesting that the PD-1-PD-L1 interaction contributes to the progression of SCC by downregulation of antitumor responses. In fact, blocking PD-1 increased the percentage of CD8(+) and CD4(+) T cells, and the levels of interferon-γ in the tumor sites. Our results indicated involvement of PD-1(+) T cells in SCC development and in the modulation of the inflammatory immune response.