Chronic lymphocytic leukemia (B-CLL) and small lymphocytic lymphoma (SLL) are part of the same disease classification but are defined by differential distribution of tumor cells. B-CLL is characterized by significant immune suppression and dysregulation but this is not typical of patients with SLL. Natural killer cells (NK) are important mediators of immune function but have been poorly studied in patients with B-CLL/SLL. Here we report for the first time the NK cell phenotype and function in patients with B-CLL and SLL alongside their transcriptional profile. We show for the first time impaired B-CLL NK cell function in a xenograft model with reduced activating receptor expression including NKG2D, DNAM-1 and NCRs in-vitro. Importantly, we show these functional differences are associated with transcriptional downregulation of cytotoxic pathway genes, including activating receptors, adhesion molecules, cytotoxic molecules and intracellular signalling molecules, which remain intact in patients with SLL. In conclusion, NK cell function is markedly influenced by the anatomical site of the tumor in patients with B-CLL/SLL and lymphocytosis leads to marked impairment of NK cell activity. These observations have implications for treatment protocols which seek to preserve immune function by limiting the exposure of NK cells to tumor cells within the peripheral circulation.