Protein degradation by proteasomes is important for the immune response against tumors. Antigens generated by the proteasome promote immune cell infiltration into tumors and improve tumor response to immunotherapy. For example, immunoproteasomes – a subset of proteasomes induced by inflammatory signals – may improve the response of melanomas to immune checkpoint inhibitors (ICI) by eliciting tumor inflammation. Yet, it is unclear whether and how protein degradation by proteasomes impacts cancer progression and contributes to immune evasion and resistance. Here, we profile the proteasome-cleaved peptides in lung cancers and find that PSME4 serves as a novel inhibitory regulator of the immunoproteasome, playing an anti-inflammatory role in cancer. Biochemical assays combined with scRNA-seq, immunopeptidomics and in vivo analyses demonstrate that PSME4 promotes an immunosuppressive environment around the tumor and abrogates anti-tumor immunity by inhibiting antigen presentation and attenuating tumor inflammation. Furthermore, we find that PSME4 expression is correlated with responsiveness to ICI across several cancer types. Our findings suggest that PSME4-mediated regulation of proteasome activity is a novel mechanism of immune evasion in non-small-cell lung carcinoma and may be targeted therapeutically for restoring anti-tumor immunity.