Neuroblastoma is the most common extracranial solid tumor of childhood, and survival remains poor for patients with advanced disease. Novel immune therapies are currently in development, but clinical outcomes have not matched preclinical results. Here, we describe key mechanisms in which neuroblastoma inhibits the immune response. We show that murine and human neuroblastoma tumor cells suppress T-cell proliferation through increased arginase activity. Arginase II is the predominant isoform expressed and creates an arginine-deplete local and systemic microenvironment. Neuroblastoma arginase activity results in inhibition of myeloid cell activation and suppression of bone marrow CD34(+) progenitor proliferation. Finally, we demonstrate that the arginase activity of neuroblastoma impairs NY-ESO-1-specific T-cell receptor and GD2-specific chimeric antigen receptor-engineered T-cell proliferation and cytotoxicity. High arginase II expression correlates with poor survival for patients with neuroblastoma. The results support the hypothesis that neuroblastoma creates an arginase-dependent immunosuppressive microenvironment in both the tumor and blood that leads to impaired immunosurveillance and suboptimal efficacy of immunotherapeutic approaches. Cancer Res; 75(15); 3043-53. ©2015 AACR.