To understand why cancer vaccine–induced T cells often do not eradicate tumors, we studied immune responses in mice vaccinated with gp100 melanoma peptide in incomplete Freund's adjuvant (peptide/IFA), which is commonly used in clinical cancer vaccine trials. Peptide/IFA vaccination primed tumor-specific CD8⁺ T cells, which accumulated not in tumors but rather 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 CD40-specific antibody, Toll-like receptor 7 (TLR7) agonist and interleukin-2 (IL-2) reduced T cell apoptosis but did not prevent vaccination-site sequestration. A nonpersisting vaccine formulation shifted T cell localization toward tumors, inducing superior antitumor activity while reducing systemic T cell dysfunction and promoting memory formation. These data show that persisting 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.