To understand why cancer vaccine-induced T cells often fail to eradicate tumors, we studied immune responses in mice vaccinated with gp100 melanoma peptide in incomplete Freund’s adjuvant (IFA), commonly used in clinical cancer vaccine trials. Peptide/IFA vaccination primed tumor-specific CD8 + T cells, which accumulated not in tumors but at the persisting, antigen-rich vaccination site. Once there, primed T cells became dysfunctional and underwent antigen-driven, Interferon-γ (IFN-γ) and Fas ligand (FasL)-mediated apoptosis, resulting in hyporesponsiveness to subsequent vaccination. Provision of anti-CD40 antibody, Toll-like receptor 7 (TLR7) agonist and interleukin-2 (IL-2) reduced T cell apoptosis but did not prevent vaccination site sequestration. A non-persisting vaccine formulation shifted T cell localization towards tumors, inducing superior anti-tumor activity while reducing systemic T cell dysfunction and promoting memory formation. Persisting peptide/IFA vaccine depots can induce specific T cell sequestration, dysfunction and deletion at vaccination sites; short-lived formulations may overcome these limitations and result in greater therapeutic efficacy of peptide-based cancer vaccines.