Tumor-infiltrating myeloid cells such as myeloid-derived suppressor cells (MDSCs) and tumor-associated macrophages (TAMs) form an important component of the hypoxic tumor microenvironment. Here, we investigated the influence of hypoxia on immune checkpoint receptors (programmed death [PD]-1 and CTLA-4) and their respective ligands (PD-1 ligand 1 [PD-L1], PD-L2, CD80, and CD86) on MDSCs. We demonstrate that MDSCs at the tumor site show a differential expression of PD-L1 as compared with MDSCs from peripheral lymphoid organ (spleen). Hypoxia caused a rapid, dramatic, and selective up-regulation of PD-L1 on splenic MDSCs in tumor-bearing mice. This was not limited to MDSCs, as hypoxia also significantly increased the expression of PD-L1 on macrophages, dendritic cells, and tumor cells. Furthermore, PD-L1 up-regulation under hypoxia was dependent on hypoxia-inducible factor-1α (HIF-1α) but not HIF-2α. Chromatin immunoprecipitation and luciferase reporter assay revealed direct binding of HIF-1α to a transcriptionally active hypoxia-response element (HRE) in the PD-L1 proximal promoter. Blockade of PD-L1 under hypoxia enhanced MDSC-mediated T cell activation and was accompanied by the down-regulation of MDSCs IL-6 and IL-10. Finally, neutralizing antibodies against IL-10 under hypoxia significantly abrogated the suppressive activity of MDSCs. Simultaneous blockade of PD-L1 along with inhibition of HIF-1α may thus represent a novel approach for cancer immunotherapy.