Abstract The challenge of eradicating leukemia in patients with acute myelogenous leukemia (AML) after initial cytoreduction has motivated modern efforts to combine synergistic active modalities including immunotherapy. Recently, the ETCTN/CTEP 10026 study tested the combination of the DNA methyltransferase inhibitor decitabine together with the immune checkpoint inhibitor ipilimumab for AML/myelodysplastic syndrome (MDS) either after allogeneic hematopoietic stem cell transplantation (HSCT) or in the HSCT-naïve setting. Integrative transcriptome-based analysis of 304 961 individual marrow-infiltrating cells for 18 of 48 subjects treated on study revealed the strong association of response with a high baseline ratio of T to AML cells. Clinical responses were predominantly driven by decitabine-induced cytoreduction. Evidence of immune activation was only apparent after ipilimumab exposure, which altered CD4+ T-cell gene expression, in line with ongoing T-cell differentiation and increased frequency of marrow-infiltrating regulatory T cells. For post-HSCT samples, relapse could be attributed to insufficient clearing of malignant clones in progenitor cell populations. In contrast to AML/MDS bone marrow, the transcriptomes of leukemia cutis samples from patients with durable remission after ipilimumab monotherapy showed evidence of increased infiltration with antigen-experienced resident memory T cells and higher expression of CTLA-4 and FOXP3. Altogether, activity of combined decitabine and ipilimumab is impacted by cellular expression states within the microenvironmental niche of leukemic cells. The inadequate elimination of leukemic progenitors mandates urgent development of novel approaches for targeting these cell populations to generate long-lasting responses. This trial was registered at www.clinicaltrials.gov as #NCT02890329.