Glioblastoma multiforme (GBM) is a lethal cancer that exerts potent immune suppression. Hypoxia is a predominant feature of GBM, but it is unclear to the degree in which tumor hypoxia contributes to this tumor-mediated immunosuppression. Utilizing GBM associated cancer stem cells (gCSCs) as a treatment resistant population that has been shown to inhibit both innate and adaptive immune responses, we compared immunosuppressive properties under both normoxic and hypoxic conditions. Functional immunosuppression was characterized based on production of immunosuppressive cytokines and chemokines, the inhibition of T cell proliferation and effector responses, induction of FoxP3+ regulatory T cells, effect on macrophage phagocytosis, and skewing to the immunosuppressive M2 phenotype. We found that hypoxia potentiated the gCSC-mediated inhibition of T cell proliferation and activation and especially the induction of FoxP3+T cells, and further inhibited macrophage phagocytosis compared to normoxia condition. These immunosuppressive hypoxic effects were mediated by signal transducer and activator of transcription 3 (STAT3) and its transcriptionally regulated products such as hypoxia inducible factor (HIF)-1α and vascular endothelial growth factor (VEGF). Inhibitors of STAT3 and HIF-1α down modulated the gCSCs' hypoxia-induced immunosuppressive effects. Thus, hypoxia further enhances GBM-mediated immunosuppression, which can be reversed with therapeutic inhibition of STAT3 and HIF-1α and also helps to reconcile the disparate findings that immune therapeutic approaches can be used successfully in model systems but have yet to achieve generalized successful responses in the vast majority of GBM patients by demonstrating the importance of the tumor hypoxic environment.