Drug resistance and immune escape of tumor cells severely compromise the treatment efficiency of hepatocellular carcinoma (HCC). Long non-coding RNA KCNQ1 overlapping transcript 1 (lncRNA KCNQ1OT1) has been shown to be involved in drug resistance in several cancers. The aim of the present study was to investigate the role of KCNQ1OT1 in sorafenib resistance and immune escape of HCC cells. Reverse transcription-quantitative PCR analysis, western blotting and immunohistochemistry were performed to detect the expression of KCNQ1OT1, miR-506 and programmed death-ligand-1 (PD-L1). Cell Counting Kit-8 assay, flow cytometry and Transwell assays were used to evaluate IC50 value, cell apoptosis and metastasis. ELISA was performed to detect the secretion of cytokines. Dual-luciferase reporter assay was conducted to verify the targeting relationships between miR-506 and KCNQ1OT1 or PD-L1. KCNQ1OT1 and PD-L1 were found to be upregulated and miR-506 was downregulated in sorafenib-resistant HCC tissues and cells. Furthermore, KCNQ1OT1 knockdown reduced the IC50 value of sorafenib, suppressed cell metastasis and promoted apoptosis in sorafenib-resistant HCC cells. Moreover, KCNQ1OT1 knockdown changed the tumor microenvironment and T-cell apoptosis in a sorafenib-resistant HCC/T-cell co-culture model. In addition, it was demonstrated that KCNQ1OT1 functioned as a competing endogenous RNA of miR-506 and increased PD-L1 expression in sorafenib-resistant HCC cells. miR-506 inhibition abolished the effects of KCNQ1OT1 knockdown on sorafenib sensitivity, tumor growth, the tumor microenvironment and T-cell apoptosis. In conclusion, KCNQ1OT1 knockdown inhibited sorafenib resistance and PD-L1-mediated immune escape by sponging miR-506 in sorafenib-resistant HCC cells.