Despite the increasing interest in targeting stromal elements of the tumor microenvironment, we still face tremendous challenges in developing adequate therapeutics to modify the tumor stromal landscape. A major obstacle to this is our poor understanding of the phenotypic and functional heterogeneity of stromal cells in tumors. Herein, we perform an unbiased interrogation of tumor mesenchymal cells, delineating the co-existence of distinct subsets of cancer-associated fibroblasts (CAFs) in the microenvironment of murine carcinomas, each endowed with unique phenotypic features and functions. Furthermore, our study shows that neutralization of TGFβ in vivo leads to remodeling of CAF dynamics, greatly reducing the frequency and activity of the myofibroblast subset, while promoting the formation of a fibroblast population characterized by strong response to interferon and heightened immunomodulatory properties. These changes correlate with the development of productive anti-tumor immunity and greater efficacy of PD1 immunotherapy. Along with providing the scientific rationale for the evaluation of TGFβ and PD1 co-blockade in the clinical setting, this study also supports the concept of plasticity of the stromal cell landscape in tumors, laying the foundation for future investigations aimed at defining pathways and molecules to program CAF composition for cancer therapy.