Adoptive transfer of CD19-redirected chimeric antigen receptor (CAR) T cells has shown remarkable activity against B-cell cancers. While second-generation CARs induce complete remission in >80% of patients with relapsed/refractory acute lymphoblastic leukemia, similar mono-therapy induces long-term remissions in only 26% of chronic lymphocytic leukemia (CLL) patients. This disparity is attributed to cell-intrinsic defects in autologous CLL-derived T cells, including poor proliferative, low levels of effector cytokine secretion, unstructured immune synapse formation, and poor cytotoxicity. However, the mechanisms by which leukemic cells impact CAR T cell potency are poorly understood. Herein we describe an in vitro assay that recapitulates endogenous CLL-mediated T cell defects in healthy donor CAR T cells. This contact with CLL cells does not irreversibly impair CAR T cell function, but instead insufficiently activates the cells. This state is rescuable by either a strong antigenic stimulus or IL-2, and is not driven by immune-suppression on the part of the CLL tumor. Rather, this activation defect is attributable to low levels of co-stimulatory molecules on CLL cells. We confirmed that exogenous co-stimulation enhanced CAR T cell activation. We also assessed the stimulatory phenotype of CLL cells derived from different immune niches within the same patient. Lymph node-derived (LN) CLL cells had a strong co-stimulatory phenotype and promoted better CAR T cell degranulation and cytokine production than matched peripheral blood (PB) CLL cells. Finally, we showed that in vitro CD40L activation can model a LN-resident CLL phenotype; these activated CLL cells acquire a stimulatory phenotype similar to the LN-derived tumor and stimulate improved CAR T cell proliferation, cytokine production, and cytotoxicity. Together these data identify insufficient activation as a driver of poor CAR T cell responses in CLL. The co-stimulatory phenotype of CLL cells drives differential CAR T cell responses, and can be augmented by improving co-stimulatory signaling in these cells. Finally, the finding that LN-derived CLL cells have a better stimulatory phenotype implicates this niche as a site of active CAR T cell killing in patients.