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Fat mass and obesity-associated protein (FTO), an RNA N⁶-methyladenosine (m⁶A) demethylase, plays oncogenic roles in various cancers, presenting an opportunity for the development of effective targeted therapeutics. Here, we report two potent small-molecule FTO inhibitors that exhibit strong anti-tumor effects in multiple types of cancers. We show that genetic depletion and pharmacological inhibition of FTO dramatically attenuate leukemia stem/initiating cell self-renewal and reprogram immune response by suppressing expression of immune checkpoint genes, especially LILRB4. FTO inhibition sensitizes leukemia cells to T cell cytotoxicity and overcomes hypomethylating agent-induced immune evasion. Our study demonstrates that FTO plays critical roles in cancer stem cell self-renewal and immune evasion and highlights the broad potential of targeting FTO for cancer therapy.