Abstract T cells demonstrate impaired function in multiple myeloma (MM) but suppressive mechanisms in the bone marrow microenvironment remain poorly defined. We observe that bone marrow CD8+ T-cell function is decreased in MM compared with controls, and is also consistently lower within bone marrow samples than in matched peripheral blood samples. These changes are accompanied by decreased mitochondrial mass and markedly elevated long-chain fatty acid uptake. In vitro modeling confirmed that uptake of bone marrow lipids suppresses CD8+ T function, which is impaired in autologous bone marrow plasma but rescued by lipid removal. Analysis of single-cell RNA-sequencing data identified expression of fatty acid transport protein 1 (FATP1) in bone marrow CD8+ T cells in MM, and FATP1 blockade also rescued CD8+ T-cell function, thereby identifying this as a novel target to augment T-cell activity in MM. Finally, analysis of samples from cohorts of patients who had received treatment identified that CD8+ T-cell metabolic dysfunction resolves in patients with MM who are responsive to treatment but not in patients with relapsed MM, and is associated with substantial T-cell functional restoration.