Ibrutinib, a covalent inhibitor of Bruton Tyrosine Kinase (BTK), is approved for treatment of patients with relapsed/refractory or treatment-naïve chronic lymphocytic leukemia (CLL). Besides directly inhibiting BTK, ibrutinib possesses immunomodulatory properties through targeting multiple signaling pathways. Understanding how this ancillary property of ibrutinib modifies the CLL microenvironment is crucial for further exploration of immune responses in this disease and devising future combination therapies. Here, we investigated the mechanisms underlying the immunomodulatory properties of ibrutinib. In peripheral blood samples collected prospectively from CLL patients treated with ibrutinib monotherapy, we observed selective and durable downregulation of PD-L1 on CLL cells by 3 months post-treatment. Further analysis showed that this effect was mediated through inhibition of the constitutively active signal transducer and activator of transcription 3 (STAT3) in CLL cells. Similar downregulation of PD-1 was observed in CD4+ and CD8+ T cells. We also demonstrated reduced interleukin (IL)-10 production by CLL cells in patients receiving ibrutinib, which was also linked to suppression of STAT3 phosphorylation. Taken together, these findings provide a mechanistic basis for immunomodulation by ibrutinib through inhibition of the STAT3 pathway, critical in inducing and sustaining tumor immune tolerance. The data also merit testing of combination treatments combining ibrutinib with agents capable of augmenting its immunomodulatory effects.