With the introduction of multiple new agents, the role of immunotherapy is rapidly expanding across all malignancies. Bladder cancer is known to be immunogenic and is responsive to immunotherapy including intravesical BCG and immune checkpoint inhibitors. Multiple trials have addressed the role of checkpoint inhibitors in advanced bladder cancer, including atezolizumab, avelumab, durvalumab, nivolumab and pembrolizumab (all targeting the PD1/PD-L1 pathway). While these trials have demonstrated promising results and improvements over existing therapies, less than half of patients with advanced disease demonstrate clinical benefit from checkpoint inhibitor therapy. Recent breakthroughs in cancer biology and immunology have led to an improved understanding of the influence of the tumor microenvironment on the host's immune system. It appears that tumors promote the formation of highly immunosuppressive microenvironments preventing generation of effective anti-tumor immune response through multiple mechanisms. Therefore, reconditioning of the tumor microenvironment and restoration of the competent immune response is essential for achieving optimal efficacy of cancer immunotherapy. In this review, we aim to discuss the major mechanisms of immune evasion in bladder cancer and highlight novel pathways and molecular targets that may help to attenuate tumor-induced immune tolerance, overcome resistance to immunotherapy and improve clinical outcomes.