Myeloid-derived suppressor cells (MDSC) are potent inhibitors of anti-tumor immunity that facilitate tumor progression by blocking the activation of CD4(+) and CD8(+) T cells and by promoting a type 2 immune response through their production of IL-10 and down-regulation of macrophage production of IL-12. MDSC accumulate in many cancer patients and are a significant impediment to active cancer immunotherapies. Chronic inflammation has been shown recently to enhance the accumulation of MDSC and to increase their suppression of T cells. These findings led us to hypothesize that inflammation contributes to tumor progression through the induction of MDSC, which create a favorable environment for tumor growth. As chronic inflammation also drives type 2 immune responses, which favor tumor growth, we asked if inflammation mediates this effect through MDSC. We find that IL-1beta-induced inflammation increased IL-10 production by MDSC and induces MDSC, which are more effective at down-regulating macrophage production of IL-12 as compared with MDSC isolated from less-inflammatory tumor microenvironments, thereby skewing tumor immunity toward a type 2 response. Inflammation heightens MDSC phenotype by signaling through the TLR4 pathway and involves up-regulation of CD14. Although this pathway is well-recognized in other myeloid cells, it has not been implicated previously in MDSC function. These studies demonstrate that MDSC are an intermediary through which inflammation promotes type 2 immune responses, and they identify the TLR4 pathway in MDSC as a potential target for down-regulating immune suppression and promoting anti-tumor immunity.