Despite the overall efficacy of immune checkpoint blockade (ICB) for mismatch repair deficiency (MMRD) across tumor types, a sizable fraction of patients with MMRD still do not respond to ICB. We performed mutational signature analysis of panel sequencing data (n = 95) from MMRD cases treated with ICB. We discover that T>C-rich single base substitution (SBS) signatures-SBS26 and SBS54 from the COSMIC Mutational Signatures catalog-identify MMRD patients with significantly shorter overall survival. Tumors with a high burden of SBS26 show over-expression and enriched mutations of genes involved in double-strand break repair and other DNA repair pathways. They also display chromosomal instability (CIN), likely related to replication fork instability, leading to copy number losses that trigger immune evasion. SBS54 is associated with transcriptional activity and not with CIN, defining a distinct subtype. Consistently, cancer cell lines with a high burden of SBS26 and SBS54 are sensitive to treatments targeting pathways related to their proposed etiology. Together, our analysis offers an explanation for the heterogeneous responses to ICB among MMRD patients and supports an SBS signature-based predictor as a prognostic biomarker for differential ICB response.