Improved understanding of expression of immune checkpoint receptors (ICR) on tumor-infiltrating lymphocytes (TIL) may facilitate more effective immunotherapy in head and neck cancer (HNC) patients. A higher frequency of PD-1⁺ TIL has been reported in human papillomavirus (HPV)⁺ HNC patients, despite the role of PD-1 in T-cell exhaustion. This discordance led us to hypothesize that the extent of PD-1 expression more accurately defines T-cell function and prognostic impact, because PD-1^high T cells may be more exhausted than PD-1^low T cells and may influence clinical outcome and response to anti-PD-1 immunotherapy. In this study, PD-1 expression was indeed upregulated on HNC patient TIL, and the frequency of these PD-1⁺ TIL was higher in HPV⁺ patients (P = 0.006), who nonetheless experienced significantly better clinical outcome. However, PD-1^high CD8⁺ TILs were more frequent in HPV⁻ patients and represented a more dysfunctional subset with compromised IFN-γ secretion. Moreover, HNC patients with higher frequencies of PD-1^high CD8⁺ TIL showed significantly worse disease-free survival and higher hazard ratio for recurrence (P < 0.001), while higher fractions of PD-1^low T cells associated with HPV positivity and better outcome. In a murine HPV⁺ HNC model, anti-PD-1 mAb therapy differentially modulated PD-1^high/low populations, and tumor rejection associated with loss of dysfunctional PD-1^high CD8⁺ T cells and a significant increase in PD-1^low TIL. Thus, the extent of PD-1 expression on CD8⁺ TIL provides a potential biomarker for anti-PD-1–based immunotherapy. Cancer Res; 77(22); 6353–64. ©2017 AACR.