CD137 (4-1BB) is a T-cell costimulatory molecule, and agonstic CD137 antibodies are currently being evaluated in the clinic as cancer immunotherapy. Recently, it was found that CD137^-/- mice or mice injected with agonistic anti-CD137 antibodies exhibit heightened antitumor responses, contrary to expectations based on other knowledge of CD137 function. Here, we report findings related to reverse signaling by CD137 ligand (CD137L) in antigen-presenting dendritic cells (DC) in tumors that address these paradoxical results. Specifically, CD137L suppressed intratumoral differentiation of IL12-producing CD103⁺ DC and type 1 tumor-associated macrophages (TAM). Differentiation of these cell types is important because they are required to generate IFNγ-producing CD8⁺ cytotoxic T lymphocytes (Tc1). Notably, CD137L blockade increased levels of IL12 and IFNγ, which promoted intratumoral differentiation of IFNγ-producing Tc1, IL12-producing CD103⁺ DC, and type 1 TAM within tumors. Our results offer an explanation for the paradoxical effects of CD137 blockade, based on differential immunomodulatory effects of CD137 signaling and reverse signaling in T cells and DC, respectively. Further, they show how CD137L blockade can seed a forward-feedback loop for activation of CD103⁺ DC/type 1 TAM and Tc1 that can create a self-perpetuating cycle of highly effective immunosurveillance. <i>Cancer Res; 77(21); 5989-6000. ©2017 AACR</i>.