Tumor extracellular matrix has been associated with drug resistance and immune suppression. Here, proteomic and RNA profiling reveal increased collagen levels in lung tumors resistant to PD-1/PD-L1 blockade. Additionally, elevated collagen correlates with decreased total CD8 T cells and increased exhausted CD8 T cell subpopulations in murine and human lung tumors. Collagen-induced T cell exhaustion occurs through the receptor LAIR1, which is upregulated following CD18 interaction with collagen, and induces T cell exhaustion through SHP-1. Reduction in tumor collagen deposition through LOXL2 suppression increases T cell infiltration, diminishes exhausted T cells, and abrogates resistance to anti-PD-L1. Abrogating LAIR1 immunosuppression through LAIR2 overexpression or SHP-1 inhibition sensitizes resistant lung tumors to anti-PD-1. Clinically, increased collagen, LAIR1, and TIM-3 expression in melanoma patients treated with PD-1 blockade predict poorer survival and response. Our study identifies collagen and LAIR1 as potential markers for immunotherapy resistance and validates multiple promising therapeutic combinations.