The pathogenesis and transition of normal urothelium into bladder carcinoma are multifactorial processes. Chronic inflammation causes initiation and progression of the underlying pathophysiology of invasive and metastatic cancer. A dichotomy is observed in the role of immune cells in bladder cancer. While the immune response defends the host by suppressing neoplastic growth, several immune cells, including neutrophils, macrophages, and T-lymphocytes, promote tumor development and progression. The levels of human neutrophil peptide-1, -2, and -3, produced by neutrophils, increase in bladder cancer and might promote tumor angiogenesis and growth. The effect of macrophages is primarily mediated by pro-inflammatory cytokines, IL-6 and TNF-α. Additionally, the underlying immunological mechanisms of two treatments, BCG and cytokine gene-modified tumor vaccines, and future directions are critically discussed.