Understanding the factors that hamper immune therapy in breast cancer may increase the range of patients who benefit. Here authors show that breast cancer cells produce and subsequently transfer active TGF-beta type II receptors to CD8 + T cells to render them exhausted, thus paralyzing the anti-tumor immune response. Cancer immunotherapies have shown clinical success in various types of tumors but the patient response rate is low, particularly in breast cancer. Here we report that malignant breast cancer cells can transfer active TGF-beta type II receptor (T beta RII) via tumor-derived extracellular vesicles (TEV) and thereby stimulate TGF-beta signaling in recipient cells. Up-take of extracellular vesicle-T beta RII (EV-T beta RII) in low-grade tumor cells initiates epithelial-to-mesenchymal transition (EMT), thus reinforcing cancer stemness and increasing metastasis in intracardial xenograft and orthotopic transplantation models. EV-T beta RII delivered as cargo to CD8(+) T cells induces the activation of SMAD3 which we demonstrated to associate and cooperate with TCF1 transcription factor to impose CD8(+) T cell exhaustion, resulting in failure of immunotherapy. The levels of T beta RII+ circulating extracellular vesicles (crEV) appears to correlate with tumor burden, metastasis and patient survival, thereby serve as a non-invasive screening tool to detect malignant breast tumor stages. Thus, our findings not only identify a possible mechanism by which breast cancer cells can promote T cell exhaustion and dampen host anti-tumor immunity, but may also identify a target for immune therapy against the most devastating breast tumors.