Sorafenib, a multitargeted antiangiogenic tyrosine kinase inhibitor, is the standard of care for patients with advanced hepatocellular carcinoma (HCC). Cumulating evidence suggests that sorafenib differentially affects immune cells; however, whether this immunomodulatory effect has any impact on antitumor immune responses is unknown. Using an orthotopic mouse model of HCC and tumor‐free mice, we investigated the effects of sorafenib on antitumor immunity and characterized the underlying mechanisms. Sorafenib treatment inhibited tumor growth and augmented antitumor immune responses in mice bearing established orthotopic HCC. The tumor‐specific effector T cell functions were upregulated, while the proportion of PD‐1‐expressing CD8⁺ T cells and regulatory T cells (Tregs) was reduced in tumor microenvironment of sorafenib‐treated mice. Mechanistically, the sorafenib‐mediated effects on Tregs could be independent of its direct tumor‐suppressing activities. Sorafenib treatment reduced Treg numbers by inhibiting their proliferation and inducing apoptosis. Moreover, sorafenib inhibited the function of Tregs, characterized by diminished expression of Treg‐associated molecules important for their function and by their impaired suppressive capacity. These data reveal that sorafenib treatment enhanced functions of tumor‐specific effector T cells as well as relieved PD‐1‐mediated intrinsic and Treg‐mediated non‐cell‐autonomous inhibitions in tumor microenvironment leading to effective antitumor immune responses. In addition to the well‐known tumor‐inhibiting activity of sorafenib, its enhancement of antitumor immunity may also contribute to the clinical efficacy. Our findings uncover a previously unrecognized mechanism of action of sorafenib and indicate that sorafenib represents a potential targeted agent suitable to be combined with immunotherapeutic approaches to treat cancer patients.