BACKGROUND: Checkpoint inhibitors have shown modest activity in patients with advanced hepatocellular carcinoma (HCC). Herein, the authors report a prospective single-institution clinical/translational phase 2 study of pembrolizumab in patients with advanced HCC and circulating biomarkers closely related to response. METHODS: Pembrolizumab was administered at a dose of 200 mg intravenously every 3 weeks among patients who may have developed disease progression while receiving, were intolerant of, or refused sorafenib. The circulating levels of cytokines, chemokines, programmed cell death protein 1 (PD-1), programmed death-ligand 1 (PD-L1), and PD-L2 were correlated with response, tumor PD-L1 expression, and other clinicopathological features. RESULTS: A total of 29 patients were treated and 28 patients were evaluable for response. The most common laboratory grade 3/4 adverse events were increases in aspartate aminotransferase and/or alanine aminotransferase and serum bilirubin, which for the most part were reversible. In terms of efficacy, one patient achieved a complete response and 8 patients achieved partial responses for an overall response rate of 32%. Four other patients had stable disease. The median progression-free survival was 4.5 months and the median overall survival was 13 months. Response did not correlate with prior sorafenib therapy, PD-L1 tumor staining, or a prior history of hepatitis. Correlative studies revealed that high baseline plasma TGF-β levels (≥200 pg/mL) significantly correlated with poor treatment outcomes after pembrolizumab. Tumor PD-L1 and plasma PD-L1/PD-1 levels were associated with plasma IFN-γ or IL-10. CONCLUSIONS: Pembrolizumab was found to demonstrate activity in patients with advanced HCC. Toxicity generally was tolerable and reversible. A set of immunological markers in blood plasma as well as PD-L1 staining indicated that baseline TGF-β could be a predictive biomarker for response to pembrolizumab. Cancer 2019;125:3603-3614.