Merkel cell carcinomas (MCCs) are rare but highly malignant skin cancers associated with a recently described polyomavirus. MCC tumors were infiltrated by T cells, including effector, central memory, and regulatory T cells. Infiltrating T cells showed markedly reduced activation as evidenced by reduced expression of CD69 and CD25. Treatment of MCC tumors in vitro with IL-2 and IL-15 led to T-cell activation, proliferation, enhanced cytokine production, and loss of viable tumor cells from cultures. Expanded tumor-infiltrating lymphocytes showed TCR repertoire skewing and upregulation of CD137. MCC tumors implanted into immunodeficient mice failed to grow unless human T cells in the tumor grafts were depleted with denileukin diftitox, suggesting that tumor-specific T cells capable of controlling tumor growth were present in MCC. Both CD4(+) and CD8(+) FOXP3(+) regulatory T cells were frequent in MCC. Fifty percent of nonactivated T cells in MCC-expressed PD-1, a marker of T-cell exhaustion, and PD-L1 and PD-L2 were expressed by a subset of tumor dendritic cells and macrophages. In summary, we observed tumor-specific T cells with suppressed activity in MCC tumors. Agents that stimulate T-cell activity, block regulatory T cell function, or inhibit PD-1 signaling may be effective in the treatment of this highly malignant skin cancer.