BackgroundInducible T cell costimulator ICOS is an emerging target in immuno-oncology. The aim of this study was to investigate the epigenetic regulation ofICOSin melanoma by DNA methylation.MethodsWe comprehensively investigateICOSDNA methylation of specific CpG sites and expression pattern within the melanoma microenvironment with regard to immune correlates, differentiation, clinical outcomes, and immune checkpoint blockade (ICB) response.ResultsOur study revealed a sequence-contextual CpG methylation pattern consistent with an epigenetically regulated gene. We found a cell type-specific methylation pattern and locus-specific correlations and associations of CpG methylation withICOSmRNA expression, immune infiltration, melanoma differentiation, prognosis, and response to ICB. HighICOSmRNA expression was identified as a surrogate for enriched immune cell infiltration and was associated with favorable overall survival (OS) in non-ICB-treated patients and predicted response and a prolonged progression-free survival (PFS) following ICB therapy initiation.ICOShypomethylation, however, significantly correlated with poor OS in non-ICB patients but predicted higher response and prolonged PFS and OS in ICB-treated patients. Moreover, we observed cytoplasmic and sporadically nuclear tumor cell-intrinsic ICOS protein expression. Tumor cell-intrinsicICOSprotein and mRNA expression was inducible by pharmacological demethylation with decitabine.ConclusionOur study identifiedICOSDNA methylation and mRNA expression as promising prognostic and predictive biomarkers for immunotherapy in melanoma and points towards a hitherto undescribed role of ICOS in tumor cells.Supplementary InformationThe online version contains supplementary material available at 10.1186/s40364-023-00508-2.