IFN-gamma plays a crucial role in anti-tumor responses and also induces expression of PD-L1, a well-established inhibitor of anti-tumor immune function. Understanding how molecular signaling regulates the function of IFN-gamma might improve its anti-tumor efficacy. Here, we show that the tumor expression of IFN-gamma expression alone has no significant prognostic value in patients with locally advanced lung adenocarcinoma. Surprisingly, patients with tumors expressing both IFN-gamma and PD-L1 have the best prognosis compared to those with tumors expressing IFN-gamma or PD-L1 alone. Transcriptome analysis demonstrated that tumor tissues expressing IFN- display gene expression associated with suppressed cell cycle progression and expansion. Unexpectedly this profile was observed in PD-L1(+) but not PD-L1 - tumors. The current concept is that PD-L1 functions as a shield protecting tumor cells from cytolytic T cell (CTL)-mediated anti-tumor progression. However, our data indicate that PD-L1 expression in the presence of IFN-gamma might serve as biomarker for the sensitivity of tumors to the inhibitory effect of IFN-gamma Mechanistic analysis revealed that in lung adenocarcinoma cells IFN-gamma induced activation of JAK2-STAT1 and PI3K-AKT pathways. The activation of JAK2-STAT1 is responsible for the anti-proliferative effect of IFN-. Inhibition of PI3K downregulated PD-L1 expression and enhanced the anti-proliferative effect of IFN-gamma, suggesting that blockade of PI3K might maximize the IFN-gamma mediated anti-tumor effect. Our findings provide evidence for crosstalk between JAK2-STAT1 and PI3K-AKT pathways in response to IFN-gamma in lung adenocarcinoma and have implications for the design of combinatorial targeted therapy and immunotherapy for the treatment of lung adenocarcinoma.