Despite the remarkable successes of cancer immunotherapies, the majority of patients will experience only partial response followed by relapse of resistant tumors. While treatment resistance has frequently been attributed to clonal selection and immunoediting, comparisons of paired primary and relapsed tumors in melanoma and breast cancers indicate that they share the majority of clones. Here, we demonstrate in both mouse models and clinical human samples that tumor cells evade immunotherapy by generating unique transient cell-in-cell structures, which are resistant to killing by T cells and chemotherapies. While the outer cells in this cell-in-cell formation are often killed by reactive T cells, the inner cells remain intact and disseminate into single tumor cells once T cells are no longer present. This formation is mediated predominantly by IFNγ-activated T cells, which subsequently induce phosphorylation of the transcription factors signal transducer and activator of transcription 3 (STAT3) and early growth response-1 (EGR-1) in tumor cells. Indeed, inhibiting these factors prior to immunotherapy significantly improves its therapeutic efficacy. Overall, this work highlights a currently insurmountable limitation of immunotherapy and reveals a previously unknown resistance mechanism which enables tumor cells to survive immune-mediated killing without altering their immunogenicity.