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Expansion of antigen-experienced CD8+ T cells is critical for the success of tumour infiltrating lymphocyte (TIL)-adoptive cell therapy (ACT) in cancer patients. Interleukin-2 (IL-2) is a key regulator of CD8+ cytotoxic T lymphocyte functions by promoting their expansion and cytotoxic capability. Therefore, it is essential to comprehend mechanistic barriers to IL-2 sensing in the tumour microenvironment (TME) to implement strategies to reinvigorate IL-2 responsiveness and T cell antitumour responses. Starting from translational data from a Phase I trial on TIL-ACT in melanoma, we showed that prostaglandin E2 (PGE2), a known negative regulator of immune response in the TME, is present in high concentrations in patient tumour tissue and leads to impaired IL-2 sensing in human CD8+ TILs via the PGE2 receptors EP2/EP4. Mechanistically, PGE2 inhibits IL-2 sensing in TILs by downregulating the IL-2Rγc chain, resulting in defective assembly of IL-2Rβ/γc membrane dimers. This results in impaired IL-2/mTOR adaptation and PGC1α transcriptional repression to cause oxidative stress and ferroptotic cell death in tumour-reactive TILs. Inhibition of PGE2-EP2/EP4 signalling during TIL expansion for ACT resulted in increased IL-2 sensing, leading to enhanced proliferation of tumour-reactive TILs and enhanced tumour control once transferred in vivo. Our study reveals fundamental features underlying the TME-PGE2 mediated impairment of human TILs with therapeutic implications for cancer immunotherapy and cell-therapy, enabling the development of targeted strategies to enhance IL-2 sensing and amplifying IL-2 response in TILs, thereby promoting the expansion of effector T cells with enhanced therapeutic potential.