Immune checkpoint blockade (ICB) has revolutionized cancer therapeutics. Desmoplastic malignancies, such as cholangiocarcinoma (CCA), have an abundant tumor immune microenvironment (TIME). However, to date, ICB monotherapy in such malignancies has been ineffective. Herein, we identify tumor-associated macrophages (TAMs) as the primary source of programmed death–ligand 1 (PD-L1) in human and murine CCA. In a murine model of CCA, recruited PD-L1⁺ TAMs facilitated CCA progression. However, TAM blockade failed to decrease tumor progression due to a compensatory emergence of granulocytic myeloid-derived suppressor cells (G-MDSCs) that mediated immune escape by impairing T cell response. Single-cell RNA sequencing (scRNA-Seq) of murine tumor G-MDSCs highlighted a unique ApoE G-MDSC subset enriched with TAM blockade; further analysis of a human scRNA-Seq data set demonstrated the presence of a similar G-MDSC subset in human CCA. Finally, dual inhibition of TAMs and G-MDSCs potentiated ICB. In summary, our findings highlight the therapeutic potential of coupling ICB with immunotherapies targeting immunosuppressive myeloid cells in CCA.