Imiquimod and Pembrolizumab in Treating Patients With Stage IIIB-IV Melanoma

Inclusion Criteria:

* Histological confirmation of stage IIIB, IIIC, IVM1a, IVM1b, or IVM1c that is not suitable for surgical resection
* Patients must not have received prior pembrolizumab or other anti-PD1/PDL1 therapies for their metastatic disease
* At least one cutaneous lesion that is amenable to treatment with topical imiquimod
* Measurable disease by RECIST
* Eastern Cooperative Oncology Group (ECOG) performance status (PS) of 0 or 1
* Absolute neutrophil count (ANC) \>= 1500/mm\^3
* Platelet count \>= 100,000/mm\^3
* Hemoglobin \> 9.0 g/dL or \>= 5.6 mmol/L without transfusion or (EPO) erythropoietin dependency (within 7 days of assessment)
* Serum total bilirubin =\< 1.5 X upper limit of normal (ULN) or direct bilirubin =\< (ULN) for subjects with total bilirubin levels \> 1.5 ULN
* Aspartate transaminase (AST) =\< 2.5 x ULN or =\< 5 x ULN for subjects with liver metastases
* Albumin \>= 2.5mg/dL
* International normalized ratio (INR) or prothrombin time (PT) =\< 1.5 X ULN unless subject is receiving anticoagulant therapy as long as PT or partial thromboplastin time (PTT) is within therapeutic range of intended use of anticoagulants
* Activated partial thromboplastin time (aPTT) =\< 1.5 ULN unless subject is receiving anticoagulant therapy as long as PT or PTT is within therapeutic range of intended use of anticoagulants
* Creatinine =\< 1.5 X upper limit of normal (ULN)

  * NOTE: measured or calculated (per institutional standard) creatinine clearance is acceptable \>= 60 mL/min for subject with creatinine levels \> 1.5 X institutional ULN
* Negative urine or serum pregnancy test done =\< 72 hours prior to first treatment, for women of childbearing potential only

  * If the urine test is positive or cannot be confirmed as negative, a serum pregnancy test will be required
* Provide informed written consent
* Willing to return to enrolling institution for follow-up
* Willing to provide tissue from a newly obtained core or excisional biopsy of a tumor lesion in appropriate low risk cutaneous lesions

  * NOTE: if the tissue biopsy is deemed to be of increased risk for the patient, the biopsy should not be performed and is optional
  * NOTE: newly-obtained is defined as a specimen obtained up to 42 days prior to registration where no anti-cancer therapy after the specimen was obtained and registration

Exclusion Criteria:

* Any of the following:

  * Pregnant women
  * Nursing women
  * Men or women of childbearing potential who are unwilling to employ adequate contraception

    * NOTE: female subjects of childbearing potential should be willing to use 2 methods of birth control or be surgically sterile, or abstain from heterosexual activity for the course of the study through 120 days after the last dose of study medication; subjects of childbearing potential are those who have not been surgically sterilized or have not been free from menses for \> 1 year; male subjects should agree to use an adequate method of contraception starting with the first dose of study therapy through 120 days after the last dose of study therapy; abstain from heterosexual activity is also acceptable method of contraception for males
* Co-morbid systemic illnesses or other severe concurrent disease which, in the judgment of the investigator, would make the patient inappropriate for entry into this study or interfere significantly with the proper assessment of safety and toxicity of the prescribed regimens
* Known history of human immunodeficiency virus (HIV) (HIV 1/2 antibodies)
* Uncontrolled intercurrent illness including, but not limited to, ongoing or active infection, symptomatic congestive heart failure, unstable angina pectoris, cardiac arrhythmia, or psychiatric illness/social situations that would limit compliance with study requirements
* Receiving any other investigational agent which would be considered as a treatment for the primary neoplasm or used an investigational device =\< 4 weeks from registration
* History of myocardial infarction =\< 6 months, or congestive heart failure requiring use of ongoing maintenance therapy for life-threatening ventricular arrhythmias
* Known history of active TB (Bacillus tuberculosis)
* Hypersensitivity to pembrolizumab or any of its excipients
* Prior anti-cancer monoclonal antibody (mAb) =\< 4 weeks prior to registration or who has not recovered (i.e., =\< grade 1 or at baseline) from adverse events due to agents administered more than 4 weeks prior to registration
* Prior chemotherapy, targeted small molecule therapy, or radiation therapy =\< 2 weeks prior to registration or who has not recovered (i.e., =\< grade 1 or at baseline) from adverse events due to a previously administered agent

  * Note: subjects with =\< grade 2 neuropathy are an exception to this criterion and may qualify for the study
  * Note: if subject received major surgery, they must have recovered adequately from the toxicity and/or complications from the intervention prior to starting therapy
* Known secondary malignancy that has progressed within the last 3 years or requires active treatment; exceptions include basal cell carcinoma of the skin or squamous cell carcinoma of the skin that has undergone potentially curative therapy or in situ cervical cancer
* Known central nervous system (CNS) metastases and/or carcinomatous meningitis
* Active autoimmune disease that has required systemic treatment in the past 2 years (i.e. with use of disease modifying agents, corticosteroids or immunosuppressive drugs); replacement therapy (eg., thyroxine, insulin, or physiologic corticosteroid replacement therapy for adrenal or pituitary insufficiency, etc.) is not considered a form of systemic treatment
* History of (non-infectious) pneumonitis that required steroids or current pneumonitis
* Active infection requiring systemic therapy
* History or current evidence of any condition, therapy, or laboratory abnormality that might confound the results of the trial, interfere with the subject?s participation for the full duration of the trial, or is not in the best interest of the subject to participate, in the opinion of the treating investigator
* Known psychiatric or substance abuse disorders that would interfere with cooperation with the requirements of the trial
* Received prior therapy with an anti-PD-1, anti-PD-L1, or anti-PD-L2 agent
* Known active hepatitis B (e.g., hepatitis B surface antigen \[HBsAg\] reactive) or hepatitis C (e.g., hepatitis C virus \[HCV\] ribonucleic acid \[RNA\] \[qualitative\] is detected)
* Received a live vaccine =\< 30 days prior to registration

  * Note: seasonal influenza vaccines for injection are generally inactivated flu vaccines and are allowed; however intranasal influenza vaccines (e.g., Flu-Mist) are live attenuated vaccines, and are not allowed