Despite recent advances in cancer immunotherapy, its efficacy in Glioblastoma (GBM) is limited due to poor understanding of molecular states and cellular plasticity of immune cells within the tumor microenvironment. Here, we combined spatial and single-cell transcriptomics of 47.284 immune cells, to map the potential cellular interactions leading to the immunosuppressive microenvironment and dysfunction of T cells. Computational approach identified a subset of IL10 releasing HMOX1+ myeloid cells which activates transcriptional programs towards a dysfunctional state in T cells, and was found to be localized within mesenchymal dominated subregions of the tumor. These findings were further validated by a human ex-vivo neocortical GBM model (n=6) coupled with patient derived peripheral T-cells. Finally, the dysfunctional transformation of T cells was shown to be rescued by JAK/STAT inhibition in both our model and in-vivo. We strongly believe that our findings would be the stepping stone towards successful development of immunotherapeutic approaches in GBM.