Malignant pleural effusion (MPE) is an indication of advanced cancer. Immune dysfunction often occurs in MPE. We aimed to identify the reason for impaired T cell activity in MPE from lung cancer patients and to provide clues toward potential immune therapies for MPE. The surface inhibitory molecules and cytotoxic activity of T cells in MPE and peripheral blood (PB) were analyzed using flow cytometry. Levels of inflammatory cytokines in MPE and PB were tested using ELISA. TGF-β expression in tumor-associated macrophages (TAMs) was also analyzed. The effect of TAMs on T cells was verified in vitro. Lastly, changes in T cells were evaluated following treatment with anti-TGF-β antibody. We found that expression levels of Tim-3, PD-1 and CTLA-4 in T cells from MPE were upregulated compared with those from PB, but levels of IFN-γ and Granzyme B were downregulated (p < 0.05). The amount of TGF-β was significantly higher in MPE than in PB (p < 0.05). TGF-β was mainly produced by TAMs in MPE. When T cells were co-cultured with TAMs, expression levels of Tim-3, PD-1 and CTLA-4 were significantly higher than controls, whereas levels of IFN-γ and Granzyme B were significantly decreased, in a dose-dependent manner (p < 0.05). In vitro treatment with anti-TGF-β antibody restored the impaired T cell cytotoxic activity in MPE. Our results indicate that macrophage-derived TGF-β plays an important role in impaired T cell cytotoxicity. It will therefore be valuable to develop therapeutic strategies against TGF-β pathway for MPE therapy of lung cancer.