Substantial progress has been made in using deep learning for cancer detection and diagnosis in medical images. Yet, there is limited success on prediction of treatment response and outcomes, which has important implications for personalized treatment strategies. A significant hurdle for clinical translation of current data-driven deep learning models is lack of interpretability, often attributable to a disconnect from the underlying pathobiology. Here, we present a biology-guided deep learning approach that enables simultaneous prediction of the tumor immune and stromal microenvironment status as well as treatment outcomes from medical images. We validate the model for predicting prognosis of gastric cancer and the benefit from adjuvant chemotherapy in a multi-center international study. Further, the model predicts response to immune checkpoint inhibitors and complements clinically approved biomarkers. Importantly, our model identifies a subset of mismatch repair-deficient tumors that are non-responsive to immunotherapy and may inform the selection of patients for combination treatments.© 2023. Springer Nature Limited.