Immunotherapy with Natural Killer T cells engineered to express a GD2-specific chimeric antigen receptor (CAR.GD2 NKTs) demonstrated potent anti-tumor activity in a metastatic model of neuroblastoma in humanized (hu)NSG mice. However, tumors eventually progressed without the loss of GD2 expression suggesting that tumor escape is due to inhibition of effector function of CAR.GD2 NKTs. Since NKTs co-localize and specifically interact with M2-like tumor-associated macrophages (TAMs), we examined whether TAMs inhibit effector functions of NKT and CAR.GD2 NKT cells. In vitro experiments revealed a reciprocal inhibition of NKTs and M2-polarized macrophages. We found that in vitro NKTs selectively kill M2-polarized macrophages and/or induce their differentiation toward M1-like cells. However, both M2- and M1-macrophages suppressed NKT-cell proliferation in response to TCR or CAR stimulation. This was associated with rapid up-regulation of PD-L1 and PD-L2 on both M2 and M1 macrophages upon addition of supernatant from activated NKTs. The analysis of tumor tissues in hu-NSG mice revealed strong up-regulation of PD-L1 expression exclusively on TAMs and not on neuroblastoma cells after treatment with CAR.GD2 NKTs. Neither neuroblastoma cells nor TAMs expressed PD1 ligands in untreated mice or in primary NB tissues from patients with stage 4 disease. Importantly, a combination of CAR.GD2 NKT cell immunotherapy with anti-PD1 blocking mAb produced significant delay in tumor growth.  Furthermore, depletion of TAMs prior to CAR.GD2 NKT cell transfer resulted in durable tumor regression. The results provide a rationale for a combined use of CAR-redirected NKTs with PD1-blocking or TAM-depleting therapeutics for immunotherapy of neuroblastoma and possibly other solid tumors.