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Cytotoxic chemotherapy has been the only systemic treatment of locally advanced and metastatic urothelial carcinoma for decades. Long-term survival remains stagnant around 12–14 months for patients with advanced disease who have progressed on or recurred after receiving first-line platinum-based chemotherapy. Improving clinical outcomes for patients with urothelial carcinoma in all disease settings requires the development of novel treatments, especially for patients who failed on first-line chemotherapy. Since the discovery of intravesical Bacillus-Calmette Guerin (BCG) in the 1970s for non-muscle invasive disease, there have not been any major breakthrough drugs that exploit the immune-sensitivity of bladder cancer until recently. Immune-checkpoint inhibitors targeting the programmed death 1/programmed death-ligand 1 (PD-1/PD-L1) and cytotoxic T-lymphocyte-associated protein 4 (CTLA-4) pathways have shown significant anti-tumor activity, tolerable safety profiles and durable, long-term responses in clinical trials. Atezolizumab, avelumab, durvalumab, nivolumab and pembrolizumab are promising PD-1/PD-L1 blockade drugs under investigation that will redefine the standard of care for bladder cancer. CTLA-4 inhibitors are also under investigation in this setting. Atezolizumab, approved in May 2016, and nivolumab, approved in February 2017, are the first Food and Drug Administration (FDA)-approved immune-checkpoint inhibitors in bladder cancer for platinum-pretreated patients based on phase II data. On March 16, 2017, results from the phase III trial KEYNOTE-045 demonstrated that survival was significantly longer in patients treated with pembrolizumab when compared with the standard second-line chemotherapy. Research into biomarkers such as PD-L1 expression, messenger RNA subtype, mutational and neoantigen load and gene signature expression will be crucial to determining why some patients respond to immunotherapy and others do not. This review article describes the advances in immunotherapy since the development of BCG, presents results from clinical trials investigating immune-checkpoint inhibitors and discusses biomarkers and prognostic factors associated with response to these new drugs.