The objective of this study was to evaluate clinical significance and immunosuppressive mechanisms of B7-H4 (B7x/B7S1), a B7 family member, in glioma. B7-H4 levels in glioma tissue/cerebral spinal fluid (CSF) were compared between different grades of glioma patients. Survival data were analyzed with Kaplan-Meier to determine the prognostic value of B7-H4. Cytokines from CD133(+) cells to stimulate the expression of B7-H4 on human macrophages (Mφs) were investigated by FACS, neutralizing antibodies, and Transwell chemotaxis assay. shRNA, reporter vector, and chromatin immunoprecipitation were used to determine the binding of STAT3 to the B7-H4 promoter. The function of B7-H4(+) Mφs in vitro was evaluated through phagocytosis, T-cell proliferation/apoptosis, and cytokine production as well as in the xenografted model for in vivo analysis. We found that B7-H4 expression in tumors was associated with prognosis of human glioblastoma and correlated directly with malignant grades. Mechanistically, glioma initiating CD133(+) cells and Mφs/microglia cointeraction activated expression of B7-H4 via IL6 and IL10 in both tumor cells and microenvironment supporting cells. IL6-activated STAT3 bound to the promoter of B7-H4 gene and enhanced B7-H4 expression. Furthermore, CD133(+) cells mediated immunosuppression through B7-H4 expression on Mφs/microglia by silencing of B7-H4 expression on these cells, which led to increased microenvironment T-cell function and tumor regression in the xenograft glioma mouse model. We have identified B7-H4 activation on Mφs/microglia in the microenvironment of gliomas as an important immunosuppressive event blocking effective T-cell immune responses. Clin Cancer Res; 22(11); 2778-90. ©2016 AACR.