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Abstract Background Regulatory T (Treg) cells have an immunosuppressive function in cancer, but the underlying mechanism of immunosuppression in the tumor microenvironment (TME) is unclear. Methods We compared the phenotypes of T cell subsets, including Treg cells, obtained from peripheral blood, malignant effusion, and tumors of 103 cancer patients. Our primary focus was on the expression of immune checkpoint (IC)-molecules, such as programmed death (PD)-1, T-cell immunoglobulin and mucin-domain containing (TIM)-3, T cell Ig and ITIM domain (TIGIT), and cytotoxic T lymphocyte antigen (CTLA)-4, on Treg cells in paired lymphocytes from blood, peritumoral tissue, and tumors of 12 patients with lung cancer. To identify the immunosuppressive mechanisms acting on tumor-infiltrating Treg cells, we conducted immunosuppressive functional assays in a mouse model. Results CD8+, CD4+ T cells, and Treg cells exhibited a gradual upregulation of IC-molecules the closer they were to the tumor. Interestingly, PD-1 expression was more prominent in Treg cells than in conventional T (Tconv) cells. In lung cancer patients, higher levels of IC-molecules were expressed on Treg cells than on Tconv cells, and Treg cells were also more enriched in the tumor than in the peri-tumor and blood. In a mouse lung cancer model, IC-molecules were also preferentially upregulated on Treg cells, compared to Tconv cells. PD-1 showed the greatest increase on most cell types, especially Treg cells, and this increase occurred gradually over time after the cells entered the TME. PD-1 high-expressing tumor-infiltrating Treg cells displayed potent suppressive activity, which could be partially inhibited with a blocking anti-PD-1 antibody. Conclusions We demonstrate that the TME confers a suppressive function on Treg cells by upregulating IC-molecule expression. Targeting IC-molecules, including PD-1, on Treg cells may be effective for cancer treatment.