Bispecific T-cell engager (BiTE®) molecules recruit T cells to cancer cells through CD3ε binding, independently of T-cell receptor (TCR) specificity. Whereas physiological T-cell activation is dependent on signal 1 (TCR engagement) and signal 2 (co-stimulation), BiTE molecule-mediated T-cell activation occurs without additional co-stimulation. As co-stimulatory and inhibitory molecules modulate the strength and nature of T-cell responses, we studied the impact of the expression profile of those molecules on target cells for BiTE molecule-mediated T-cell activation in the context of acute myeloid leukemia (AML). Accordingly, we created a novel in vitro model system using murine Ba/F3 cells transduced with human CD33 ± CD86 ± PD-L1. T-cell fitness was assessed by T-cell function assays in co-cultures and immune synapse formation by applying a CD33 BiTE molecule (AMG 330). Using our cell-based model platform, we found that the expression of positive co-stimulatory molecules on target cells markedly enhanced BiTE molecule-mediated T-cell activation. The initiation and stability of the immune synapse between T cells and target cells were significantly increased through the expression of CD86 on target cells. By contrast, the co-inhibitory molecule PD-L1 impaired the stability of BiTE molecule-induced immune synapses and subsequent T-cell responses. We validated our findings in primary T-cell-AML co-cultures, demonstrating a PD-L1-mediated reduction in redirected T-cell activation. The addition of the immunomodulatory drug (IMiD) lenalidomide to co-cultures led to stabilization of immune synapses and improved subsequent T-cell responses. We conclude that target cells modulate CD33 BiTE molecule-dependent T-cell activation and hence, combinatorial strategies might contribute to enhanced efficacy.Supplementary InformationThe online version contains supplementary material available at 10.1007/s00262-023-03439-x.