Cancer immunotherapy with 4-1BB agonists has limited further clinical development because of dose-limiting toxicity. Here, we developed a bispecific antibody (bsAb; B7-H3×4-1BB), targeting human B7-H3 (hB7-H3) and mouse or human 4-1BB, to restrict the 4-1BB stimulation in tumors. B7-H3×m4-1BB elicited a 4-1BB–dependent antitumor response in hB7-H3–overexpressing tumor models without systemic toxicity. BsAb primarily targets CD8 T cells in the tumor and increases their proliferation and cytokine production. Among the CD8 T cell population in the tumor, 4-1BB is solely expressed on PD-1+Tim-3+ “terminally differentiated” subset, and bsAb potentiates these cells for eliminating the tumor. Furthermore, the combination of bsAb and PD-1 blockade synergistically inhibits tumor growth accompanied by further increasing terminally differentiated CD8 T cells. B7-H3×h4-1BB also shows antitumor activity in h4-1BB–expressing mice. Our data suggest that B7-H3×4-1BB is an effective and safe therapeutic agent against B7-H3–positive cancers as monotherapy and combination therapy with PD-1 blockade.