Purpose: Acute myeloid leukemia (AML) provides an environment that enables immune suppression, resulting in functionally defective effector T cells; regulatory T cells (Treg) are significant contributors to the impaired antitumor immune response. As TNF is present at high levels in AML and TNF receptor-2 (TNFR2)-expressing Tregs identify highly functional Tregs, we examine the hypothesis that TNFR2+ Tregs are a relevant Treg subset in this cancer. We also determine the effect of the novel combinatorial therapy of the demethylating agent, azacitidine with the histone deacetylase inhibitor, panobinostat on Tregs, particularly TNFR2+ Tregs. Experimental Design: Thirty healthy donors and 14 patients with AML were enrolled in this study. Patients were treated with azacitidine and panobinostat for 28-day cycles. The frequency and functional relevance of TNFR2+ Tregs were analyzed subsequently. Results: We report that TNFR2+ Tregs are increased in AML and have a high migration potential toward the bone marrow. Furthermore, we demonstrate that the level of TNFR2+ Tregs in the peripheral blood and the bone marrow of patients are decreased in vivo after exposure to panobinostat and azacitidine. Reductions in TNFR2+ Tregs were associated with increases in Interferon (IFN)-g and interleukin (IL)-2 production by effector T cells within the bone marrow and beneficial clinical responses. In vitro mechanistic studies indicated panobinostat as the primary driver for the reduction of Tregs. Conclusions: Our study provides for the first time, in vivo validation of the ability of panobinostat in combination with azacitidine to suppress prevalent TNFR2+ Tregs, resulting in clinical benefits within patients with AML. ? 2014 American Association for Cancer Research.