CD8 + T cell exhaustion is a state of dysfunction acquired in chronic viral infection and cancer, characterized by the formation of Slamf6 + progenitor exhausted and Tim-3 + terminally exhausted subpopulations through unknown mechanisms. Here we establish the phosphatase PTPN2 as a novel regulator of the differentiation of the terminally exhausted subpopulation that functions by attenuating type 1 interferon signaling. Deletion of Ptpn2 in CD8 + T cells increased the generation, proliferative capacity, and cytotoxicity of Tim-3 + cells without altering Slamf6 + numbers during LCMV Clone 13 infection. Likewise , Ptpn2-deletion in CD8 + T cells enhanced Tim-3 + anti-tumor responses and improved tumor control. Deletion of Ptpn2 throughout the immune system resulted in MC38 tumor clearance and improved PD-1 checkpoint blockade responses to B16 tumors. Our results indicate that increasing the number of cytotoxic Tim-3 + CD8 + T cells can promote effective anti-tumor immunity and implicate PTPN2 in immune cells as an attractive cancer immunotherapy target.