Patients with relapsed or refractory acute myeloid leukemia (AML) or myelodysplastic syndrome (MDS) were treated with ipilimumab and decitabine on NCI Experimental Therapeutics Clinical Trials Network/Cancer Therapy Evaluation Program 10026 (NCT02890329). Patients with postallogeneic hematopoietic cell transplantation (HCT) relapse or HCT naïve were enrolled in 2 separate cohorts. Responses in patients with bone marrow disease were observed but were transient, whereas more durable responses were seen in patients with extramedullary disease (eg, leukemia cutis). In patients with bone marrow disease, ipilimumab led to the recruitment of CD4⁺ FOXP3⁺ regulatory T cells but not CD8⁺ T cells to the marrow, and expression of inhibitory receptors (IRs), including CTLA-4, was infrequent on CD4⁺ and CD8⁺ marrow-infiltrating T cells. In contrast, T cells infiltrating extramedullary relapses expressed CTLA-4 and FOXP3, along with markers of resident memory. One exceptional responder with bone marrow disease had a preponderance of CTLA-4⁺ FOXP3⁺ T cells at baseline, suggesting the overall modest responses seen in bone marrow disease were due to lack of target for CTLA-4 blockade. Overall, the results from this study indicate that the bone marrow environment has distinct effects on T cells that might render immune checkpoint blockade less effective for bone marrow resident malignancies. Created with BioRender.com.