We investigated the impact of cancer-associated mesenchymal stem cells (CA-MSCs) on ovarian tumor immunity. In patient samples, CA-MSC presence inversely correlates with the presence of intratumoral CD8+ T cells. Using an immune “hot” mouse ovarian cancer model, we found that CA-MSCs drive CD8+ T cell tumor immune exclusion and reduce response to anti–PD-L1 immune checkpoint inhibitor (ICI) via secretion of numerous chemokines (Ccl2, Cx3cl1, and Tgf-β1), which recruit immune-suppressive CD14+Ly6C+Cx3cr1+ monocytic cells and polarize macrophages to an immune suppressive Ccr2hiF4/80+Cx3cr1+CD206+ phenotype. Both monocytes and macrophages express high levels of transforming growth factor β–induced (Tgfbi) protein, which suppresses NK cell activity. Hedgehog inhibitor (HHi) therapy reversed CA-MSC effects, reducing myeloid cell presence and expression of Tgfbi, increasing intratumoral NK cell numbers, and restoring response to ICI therapy. Thus, CA-MSCs regulate antitumor immunity, and CA-MSC hedgehog signaling is an important target for cancer immunotherapy.