Current methodologies for developing patient-derived xenografts (PDX) in humanized mice in preclinical trials to test response to immune-based therapies are limited by graft versus host disease. Here we compared two approaches for establishing PDX tumors in humanized mice: 1) PDX are first established in immune-deficient mice; 2) PDX are initially established in humanized mice, before transplanting established PDX’s to a larger cohort of humanized mice for preclinical trials. With the first approach, there was rapid wasting of PDX-bearing humanized mice with high levels of activated T cells in the circulation and organs, indicating immune-mediated toxicity. In contrast, with the second approach, toxicity was less of an issue and long-term human melanoma tumor growth and maintenance of human chimerism was achieved. Pre-clinical trials from the second approach revealed that rigosertib, but not anti-PD-1, increased CD8/CD4 T cell ratios in spleen and blood and inhibited PDX tumor growth. Resistance to anti-PD-1 was associated with limited infiltration of CD8+ T cell into the tumor. Our findings suggest that it is essential to carefully manage immune editing by first establishing PDX tumors in the presence of human immune cells before expanding PDX tumors into a larger cohort of humanized mice to evaluate therapy response.