Exhausted T-cells in follicular lymphoma (FL) typically express PD-1, but expression of PD-1 is not limited to exhausted cells. Although expected to be functionally suppressed, we found that the population of intratumoral PD-1+ T cells were predominantly responsible for production of cytokines and granules. This surprising finding prompted us to explore the involvement of LAG-3 to specifically identify functionally exhausted T cells. We found that LAG-3 was expressed on a subset of intratumoral T cells from FL and LAG-3+ T cells almost exclusively came from PD-1+ population. CyTOF analysis revealed that intratumoral LAG-3+ T cells were phenotypically heterogeneous as LAG-3 was expressed on a variety of T cell subsets. In contrast to PD-1+LAG-3- cells, intratumoral PD-1+LAG-3+ T cells exhibited reduced capacity to produce cytokines and granules. LAG-3 expression could be substantially upregulated on CD4+ or CD8+ T cells by IL-12, a cytokine that has been shown to induce T-cell exhaustion and be increased in the serum of lymphoma patients. Furthermore, we found that blockade of both PD-1 and LAG-3 signaling enhanced the function of intratumoral CD8+ T cells resulting in increased IFN-gamma and IL-2 production. Clinically, LAG-3 expression on intratumoral T cells correlated with a poor outcome in FL patients. Taken together, we find that LAG-3 expression is necessary to identify the population of intratumoral PD-1+ T cells that are functionally exhausted and, in contrast, find that PD-1+LAG-3- T cells are simply activated cells that are immunologically functional. These findings may have important implications for immune checkpoint therapy in FL.