The pathogenesis of many diseases involves uncontrolled inflammation. Overactive inflammatory response to remove pathogens sometimes leads to undesirable outcome of collateral tissue damage. The adenosine-A2A adenosine receptor (A2AR) pathway plays an important role in protecting tissues from excessive damage during inflammation by suppressing immune responses including T cell activation. Local levels of extracellular adenosine are known to increase in tissues receiving insufficient oxygen supply (hypoxia). Tumors and local inflammation sites are hypoxic and contain high levels of extracellular adenosine. Therefore, in patho-physiological conditions such as infection and cancer, T cells may have to get activated in an adenosine rich environment. The current study was designed to characterize effector functions of the T cells that are activated in the presence of elevated levels of adenosine. The data demonstrates that T cell activation in the presence of A2AR signaling strongly inhibited development of cytotoxicity and cytokine-producing activity in T cells, whereas the inhibition of T cell proliferation was only marginal. Both CD4+ and CD8+ T cell subsets showed similar results and were found to be susceptible to A2AR-mediated immunosuppression. Importantly, the impaired effector functions persisted in long term culture even after removal of the A2AR agonist. Thus, although the adenosine-rich microenvironment may allow for the expansion of T cells, the functional activation of T cells may be critically impaired. This mechanism could explain the inefficiency of anti-tumor T cells in the tumor micro-environment.