Inclusion Criteria:

* Patients must have histologically proven, recurrent, non-muscle invasive urothelial carcinoma of the bladder within 60 days prior to registration; the carcinoma must be stage T1 high-grade, stage CIS, or stage Ta high-grade
* Patients with mixed urothelial carcinoma and a glandular and/or squamous component will be eligible for the trial, but the presence of other histologic variants, pure adenocarcinoma, or pure squamous cell carcinoma, or pure squamous carcinoma in situ will make a patient ineligible
* Patients must have had all visible tumor resected completely within 60 days prior to registration; CIS disease is not expected to be completely excised; all patients must have tumor tissue from the histologic diagnosis of recurrence available for central pathology review submission; failure to submit these materials will make the patient ineligible for this study
* Patients must have had cystoscopy confirming no visible papillary tumor within 21 days prior to registration; (CIS disease is not expected to have been completely excised); if the transurethral resection of bladder tumor (TURBT) or bladder biopsy falls within 21 days of registration it will fulfill this criterion
* Patients must have had urine cytology within 21 days prior to registration; cytology for patients with CIS component is not expected to be negative for malignant cells; if the cytology for male patients with only Ta/T1 disease in the absence of CIS is positive for malignant cells, patient must have had a biopsy of the prostatic urethra within the previous six months
* All patients with T1 urothelial carcinoma at study entry must undergo re-TURBT within 60 days prior to registration, and must have evidence of uninvolved muscularis propria in the pathologic specimen from either the first or the second TURBT; tissue from the re-resection must be submitted for central review in addition to the tissue from the first TURBT; the TURBT that identified the recurrent T1 disease may have taken place more than 60 days prior to registration but not more than 120 days; patients with high grade Ta or CIS do not require a re-TURBT, but if this is performed at the discretion of the treating physician, the second TURBT must be within 60 days of registration; there is no requirement for muscularis propria in the specimen of Ta/CIS patients, but the tissue from the first and second TURBTs must be submitted for central review; if a patient with Ta/T1 disease undergoes repeat TURBT, the patient will be stratified as having CIS if there is CIS on either TURBT
* Patients must not have had urothelial carcinoma in the prostatic urethra within the previous 24 months or muscle invasive urothelial carcinoma of the bladder at any time; patients with prior urothelial carcinoma in the upper urinary tract within the previous 24 months will only be eligible if they had =\< T1 carcinoma and were treated with nephroureterectomy; patients must have a computed tomography (CT) or magnetic resonance imaging (MRI) (including CT-intravenous pyelogram \[IVP\], CT-urogram or MR-urogram) of the abdomen and pelvis to rule out upper tract malignancy and intra-abdominal metastases within 90 days prior to registration; if a patient cannot tolerate intravenous contrast, a retrograde pyelogram should be performed within 90 days prior to registration
* Patients must be deemed unfit for radical cystectomy by the treating physician, or the patient must refuse radical cystectomy, which is considered standard of care for these patients; the reason for patients not to undergo cystectomy will be clearly documented
* Patients must be BCG-unresponsive; a patient is BCG-unresponsive if they meet one or more of the following criteria:

* Patient has persistent or recurrent high-grade Ta/CIS urothelial carcinoma after completing therapy with at least induction BCG (\>= 5 doses) and first round maintenance (\>= 2 doses) or second induction BCG (\>= 2 doses); both rounds of BCG must have been administered within a 12 month period; these patients must have either had high-grade Ta tumors and did not achieve a disease-free state for more than 6 months following last dose of BCG, or they had CIS and did not achieve a CR; S1605 registration must occur within 9 months of the last dose of BCG

* If a patient does not meet these criteria only because the last dose of BCG was more than 9 months ago, the patient may become eligible if he/she shows histologically proven high-grade recurrence after an additional round of induction or maintenance BCG (\>= 3 doses) within 9 months prior to registration
* Patient has persistent or recurrent high grade T1 urothelial carcinoma after completing therapy with at least induction BCG (\>= 5 doses); patients with recurrent high grade T1 urothelial carcinoma after additional rounds of BCG will also be eligible, but one round of maintenance therapy or a second induction is not a pre-requisite for these patients. Trial registration must occur within 9 months of the last dose of BCG

* If a patient does not meet these criteria only because the last dose of BCG was more than 9 months ago, the patient may become eligible if he/she shows histologically proven high grade recurrence after an additional round of induction or maintenance BCG (\>= 3 doses) within 9 months prior to registration
* Patient achieves disease-free state at 6 month time point (i.e., complete response; presence of only low-grade tumor at this timepoint is still considered complete response) after induction and maintenance (or second round of induction) BCG but later experiences a high-grade Ta/T1 recurrence (with or without concomitant CIS) within 6 months after the last dose of BCG or recurrent CIS (in absence of concomitant Ta/T1 tumor) within 12 months after the last BCG dose; the time of eligibility is measured from the last dose of BCG to the time of disease recurrence; the patient must be registered on the trial within 60 days of this recurrence, or within 60 days of a re-TURBT if indicated
* All adverse events associated with any prior surgery and intravesical therapy must have resolved to grade =\< 2 prior to registration
* Absolute neutrophil count (ANC) \>= 1,500 microliter (mcL) (within 42 days prior to registration)
* Platelets \>= 100,000/mcL (within 42 days prior to registration)
* Hemoglobin \>= 9 g/dL (within 42 days prior to registration)
* Total bilirubin =\< 1.5 x institutional upper limit of normal (IULN) (except Gilbert's syndrome, who must have a total bilirubin \< 3.0 mg/dL) (within 42 days prior to registration)
* Aspartate aminotransferase (AST) or alanine aminotransferase (ALT) =\< 2 x IULN (within 42 days prior to registration)
* Serum creatinine =\< 1.5 ULN OR measured or calculated creatinine clearance \>= 30 mL/min (within 42 days prior to registration)
* Patients must have Zubrod performance status =\< 2
* Patients must have a baseline electrocardiograph (ECG) performed within 42 days prior to registration
* Patients positive for human immunodeficiency virus (HIV) are eligible only if they have all of the following:

* A stable regimen of highly active anti-retroviral therapy (HAART)
* No requirement for concurrent antibiotics or antifungal agents for the prevention of opportunistic infections
* A CD4 count above 250 cells/mcL and an undetectable HIV viral load on standard PCR-based tests
* No other prior malignancy is allowed except, for the following: adequately treated basal cell or squamous cell skin cancer, in situ cervical cancer, adequately treated stage I or II cancer from which the patient is currently in complete remission, or any other cancer from which the patient has been disease free for five years
* Patients must be offered the opportunity to participate in specimen banking for future studies, to include translational medicine studies
* Patients must be informed of the investigational nature of this study and must sign and give written informed consent in accordance with institutional and federal guidelines
* As a part of the oncology patient enrollment network (OPEN) registration process the treating institution's identity is provided in order to ensure that the current (within 365 days) date of institutional review board approval for this study has been entered in the system

Exclusion Criteria:

* Patients must not have had prior systemic chemotherapy for bladder cancer or systemic immunotherapy, including, but not limited to interferon alfa-2b, high dose interleukin 2 (IL-2), pegylated interferon (PEG-IFN), PD-1, anti-PD-L1, intra-tumoral; patients must not have had vaccine therapies within 6 weeks prior to registration; patients must not have received or be planning to receive any of the prohibited therapies during protocol treatment; prior intravesical administration of chemotherapy, interferon, Vicinium (VB4-485), BC-819 or Instiladrin (rAd-interferon-alpha/Syn3) is allowed if all other criteria are met and the last administration was \>= 30 days before registration
* Patients must not be planning to receive concomitant other biologic therapy, radiation therapy, intravesical chemotherapy, surgery, or other anti-cancer therapy while on this protocol
* Patients must not have received any prior radiation to the bladder for bladder cancer
* Patients must not have received treatment with systemic immunosuppressive medications (including, but not limited to, prednisone, cyclophosphamide, azathioprine, methotrexate, thalidomide, and anti-tumor necrosis factor \[anti-TNF\] agents) within 4 weeks prior to registration; exceptions: (1) patients may have received acute, low dose, systemic immunosuppressant medications (e.g., a one-time dose of dexamethasone for nausea); (2) the use of inhaled corticosteroids and mineralocorticoids (e.g., fludrocortisone) for patients with orthostatic hypotension or adrenocortical insufficiency is allowed
* Patients must not have received a live, attenuated vaccine within 4 weeks before registration or anticipation that such a live, attenuated vaccine will be required during the study and up to 5 months after the last dose of atezolizumab

* Influenza vaccination should be given during influenza season only (approximately October to March); patients must not receive live, attenuated influenza vaccine within 4 weeks prior to cycle 1, day 1 or at any time during the study
* Patients must not require treatment with a RANKL inhibitor (e.g. denosumab) who cannot discontinue it before treatment with atezolizumab
* Patient must not have history of idiopathic pulmonary fibrosis, pneumonitis (including drug induced), organizing pneumonia (i.e., bronchiolitis obliterans, cryptogenic organizing pneumonia, etc.), or evidence of active pneumonitis
* Patients must not have an active infection requiring oral or IV antibiotics within 14 days prior to registration; patients receiving prophylactic antibiotics (e.g., for prevention of a urinary tract infection or chronic obstructive pulmonary disease) are eligible
* Patients must not have severe infections within 28 days prior to registration, including but not limited to hospitalization for complications of infection, bacteremia, or severe pneumonia
* Patients must not have active autoimmune disease that has required systemic treatment in past two years (i.e., with use of disease modifying agents, corticosteroids or immunosuppressive drugs); replacement therapy (e.g., thyroxine, insulin, or physiologic corticosteroid replacement therapy for adrenal or pituitary insufficiency, etc.) is not considered a form of systemic treatment; autoimmune diseases include, but are not limited to, systemic lupus erythematosus, rheumatoid arthritis, inflammatory bowel disease, vascular thrombosis associated with antiphospholipid syndrome, Wegener's granulomatosis, Sjogren's syndrome, Bell's palsy, Guillain-Barre syndrome, multiple sclerosis, autoimmune thyroid disease, vasculitis, or glomerulonephritis
* Patients must not have undergone prior allogeneic bone marrow transplantation or prior solid organ transplantation
* Patient must not have active tuberculosis
* Patients must not have active hepatitis B (chronic or acute) or active hepatitis C infection

* Patients with past or resolved hepatitis B infection (defined as having a negative hepatitis B surface antigen \[HBsAg\] test and a positive anti-HBc \[antibody to hepatitis B core antigen\] antibody test) are eligible
* Patients positive for hepatitis C virus (HCV) antibody are eligible only if polymerase chain reaction (PCR) is negative for HCV RNA
* Patients must not be pregnant or nursing due to the potential teratogenic side effects of the protocol treatment; administration of atezolizumab may have an adverse effect on pregnancy and poses a risk to the human fetus, including embryo-lethality; women of child-bearing potential and men must agree to use adequate contraception (hormonal or barrier method of birth control; abstinence) prior to study entry, for the duration of study participation, and for 5 months (150 days) after the last dose of study agent; a woman is considered to be of "reproductive potential" if she has had menses at any time in the preceding 12 consecutive months; should a woman become pregnant or suspect she is pregnant while she or her partner is participating in this study, she should inform her treating physician immediately
* Due to the potential drug reaction with atezolizumab, patients must not be known to be allergic to Chinese hamster egg or ovaries