In the tumor microenvironment, local immune dysregulation is driven in part by macrophages and dendritic cells that are polarized to a mixed proinflammatory/immune-suppressive phenotype. The unfolded protein response (UPR) is emerging as the possible origin of these events. Here we report that the inositol-requiring enzyme 1 (IRE1α) branch of the UPR is directly involved in the polarization of macrophages in vitro and in vivo, including the up-regulation of interleukin 6 (IL-6), IL-23, Arginase1, as well as surface expression of CD86 and programmed death ligand 1 (PD-L1). Macrophages in which the IRE1α/X-box binding protein 1 (Xbp1) axis is blocked pharmacologically or deleted genetically have significantly reduced polarization and CD86 and PD-L1 expression, which was induced independent of IFNγ signaling, suggesting a novel mechanism in PD-L1 regulation in macrophages. Mice with IRE1α- but not Xbp1-deficient macrophages showed greater survival than controls when implanted with B16.F10 melanoma cells. Remarkably, we found a significant association between the IRE1α gene signature and CD274 gene expression in tumor-infiltrating macrophages in humans. RNA sequencing (RNASeq) analysis showed that bone marrow-derived macrophages with IRE1α deletion lose the integrity of the gene connectivity characteristic of regulated IRE1α-dependent decay (RIDD) and the ability to activate CD274 gene expression. Thus, the IRE1α/Xbp1 axis drives the polarization of macrophages in the tumor microenvironment initiating a complex immune dysregulation leading to failure of local immune surveillance.