Chemotherapy is a critical modality in cancer therapy to combat malignant cell proliferation by directly attacking cancer cells and inducing immunogenic cell death, serving as a vital component of multi-modal treatment strategies for enhanced therapeutic outcomes. However, chemotherapy may inadvertently contribute to the immunosuppression of the tumor microenvironment (TME), inducing the suppression of antitumor immune responses, which can ultimately affect therapeutic efficacy. Chemo-immunotherapy, combining chemotherapy and immunotherapy in cancer treatment, has emerged as a ground-breaking approach to target and eliminate malignant tumors and revolutionize the treatment landscape, offering promising, durable responses for various malignancies. Notably, functional nanomaterials have substantially contributed to chemo-immunotherapy by co-delivering chemo-immunotherapeutic agents and modulating TME. In this review, recent advancements in chemo-immunotherapy are thus summarized to enhance treatment effectiveness, achieved by reversing the immunosuppressive TME (ITME) through the exploitation of immunotherapeutic drugs, or immunoregulatory nanomaterials. The effects of two-way immunomodulation and the causes of immunoaugmentation and suppression during chemotherapy are illustrated. The current strategies of chemo-immunotherapy to surmount the ITME and the functional materials to target and regulate the ITME are discussed and compared. The perspective on tumor immunosuppression reversal strategy is finally proposed.