Tumor-associated macrophages (TAMs) constitute a major component of the immune cell infiltrate observed in the tumor microenvironment (TME). Factors present in the TME, including tumor growth factor-β (TGF-β), allow tumors to circumvent host-mediated immune responses to promote tumor progression. However, the molecular mechanism(s) involved are not clear. Toll-like receptors (TLRs) are important mediators of innate immune responses by immune cells, whose activation triggers the production of molecules required for anti-tumoral responses. Interleukin (IL) receptor-associated kinase (IRAK)-M is an inactive serine/threonine kinase, predominantly expressed in macrophages and is a potent negative regulator of TLR signaling. In this study, we show that TAMs express significantly higher levels of IRAK-M compared with peritoneal macrophages in a syngeneic mouse model of lung cancer. Subcutaneous implantation of Lewis lung carcinoma cells in IRAK-M(-/-) mice resulted in a five-fold reduction in tumor growth as compared with tumors in wild-type (WT) animals. Furthermore, compared with WT TAMs, TAMs isolated from IRAK-M(-/-) mice displayed features of a classically activated (M1) rather than alternatively activated (M2) phenotype, as manifest by greater expression of IL-12, interferon-γ (IFN-γ) and inducible nitric oxide synthase. Human lung cancer cells induced IRAK-M expression in human peripheral blood mononuclear cells (PBMCs) when co-cultured together. Tumor cell-induced expression of IRAK-M was dependent on the activation of TGF-β pathway. Similarly, treatment of human PBMCs or mouse macrophage cell line, RAW 264.4, with TGF-β, induced IRAK-M expression. Interestingly, IRAK-M gene expression in 439 human lung adenocarcinoma tumors correlated with poor survival in patients with lung cancer. Together, our data demonstrates that TGF-β-dependent induction of IRAK-M expression is an important, clinically relevant mechanism by which tumors may circumvent anti-tumor responses of macrophages.