CD137 (4-1BB) is a T cell co-stimulatory molecule and agonstic CD137 antibodies are currently being evaluated in 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 IL-12-producing CD103+ DC and type 1 tumor-associated macrophages (TAM). Differentiation of these cell types is important because they are required to generate IFN-gamma-producing CD8+ cytotoxic T lymphocytes (Tc1). Notably, CD137L blockade increased levels of IL-12 and IFN-gamma which promoted intratumoral differentiation of IFN-gamma-producing Tc1, IL-12-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.