Treatment of cancer has been revolutionized by immune checkpoint blockade therapies. Despite the high rate of response in advanced melanoma, the majority of patients succumb to disease. To identify factors associated with success or failure of checkpoint therapy, we profiled transcriptomes of 16,291 individual immune cells from 48 tumor samples of melanoma patients treated with checkpoint inhibitors. Two distinct states of CD8+ T cells were defined by clustering and associated with patient tumor regression or progression. A single transcription factor, TCF7, was visualized within CD8+ T cells in fixed tumor samples and predicted positive clinical outcome in an independent cohort of checkpoint-treated patients. We delineated the epigenetic landscape and clonality of these T cell states and demonstrated enhanced antitumor immunity by targeting novel combinations of factors in exhausted cells. Our study of immune cell transcriptomes from tumors demonstrates a strategy for identifying predictors, mechanisms, and targets for enhancing checkpoint immunotherapy.