Persistent antigen stimulation promotes differentiation of exhausted CD8 T (T) cells. T cells are distinct from circulating memory T (T) cells but share many features with tissue-resident memory (T) cells established following infection resolution. CD8 T cells co-expressing residency- and exhaustion-associated molecules in chronic diseases often correlate with clinical outcomes. However, the relationship between these cells and conventional T or T cells remains unclear. Here, we show that chronic antigen stimulation drives development of tissue-resident T (TR-T) cells that are ontologically and functionally distinct from T cells generated after antigen clearance. TR-T phenotypically resembled T cells but were regulated by distinct transcriptional networks and were uniquely dependent on Tox for residency programming. Although T progenitor cells acquired residency features upon entering chronically infected tissues, they failed to generate conventional T cells after antigen withdrawal. Conversely, T cells were able to differentiate into T cells during chronic antigen stimulation. Deriving cell-state specific transcriptional signatures revealed a selective association of TR-T cells with patient responses to immune checkpoint blockade, and only TR-T but not T cells responded to PD-1 pathway inhibition in vivo. These data suggest that TR-T and T cells are developmentally distinct cell types that share a tissue-residency program but have distinct roles in disease control.