Successful treatment of acute myeloid leukemia (AML) with chimeric antigen receptor (CAR) T cells is hampered by toxicity on normal hematopoietic progenitor cells and low CAR T cell persistence. Here, we develop third-generation anti-CD123 CAR T cells with a humanized CSL362-based ScFv and a CD28-OX40-CD3ζ intracellular signaling domain. This CAR demonstrates anti-AML activity without affecting the healthy hematopoietic system, or causing epithelial tissue damage in a xenograft model. CD123 expression on leukemia cells increases upon 5′-Azacitidine (AZA) treatment. AZA treatment of leukemia-bearing mice causes an increase in CTLA-4^negative anti-CD123 CAR T cell numbers following infusion. Functionally, the CTLA-4^negative anti-CD123 CAR T cells exhibit superior cytotoxicity against AML cells, accompanied by higher TNFα production and enhanced downstream phosphorylation of key T cell activation molecules. Our findings indicate that AZA increases the immunogenicity of AML cells, enhancing recognition and elimination of malignant cells by highly efficient CTLA-4^negative anti-CD123 CAR T cells.