Several preclinical studies demonstrate that antitumor efficacy of programmed cell death-1 (PD-1)/programmed death-ligand 1 (PD-L1) blockade can be improved by combination with other checkpoint inhibitors. Lymphocyte-activation gene 3 (LAG-3) is an inhibitory checkpoint receptor involved in T cell exhaustion and tumor immune escape. Here, we describe ABL501, a bispecific antibody targeting LAG-3 and PD-L1 in modulating immune cell responses against tumors. ABL501 that efficiently inhibits both LAG-3 and PD-L1 pathways enhances the activation of effector CD4+ and CD8+ T cells with a higher degree than a combination of single anti-LAG-3 and anti-PD-L1. The augmented effector T cell responses by ABL501 resulted in mitigating regulatory-T-cell-mediated immunosuppression. Mechanistically, the simultaneous binding of ABL501 to LAG-3 and PD-L1 promotes dendritic cell (DC) activation and tumor cell conjugation with T cells that subsequently mounts effective CD8+ T cell responses. ABL501 demonstrates its potent in vivo antitumor efficacy in a humanized xenograft model and with knockin mice expressing human orthologs. The immune profiling analysis of peripheral blood reveals an increased abundance of LAG-3hiPD-1hi memory CD4+ T cell subset in relapsed cholangiocarcinoma patients after gemcitabine plus cisplatin therapy, which are more responsive to ABL501. This study supports the clinical evaluation of ABL501 as a novel cancer immunotherapeutic, and a first-in-human trial has started (NCT05101109).