Dendritic cells (DCs) and myeloid-derived suppressor cells (MDSCs) show opposing roles in the immune system. In the present study, we report that the establishment of a positive feedback loop between prostaglandin E(2) (PGE(2)) and cyclooxygenase 2 (COX2), the key regulator of PGE(2) synthesis, represents the determining factor in redirecting the development of CD1a(+) DCs to CD14(+)CD33(+)CD34(+) monocytic MDSCs. Exogenous PGE(2) and such diverse COX2 activators as lipopolysaccharide, IL-1β, and IFNγ all induce monocyte expression of COX2, blocking their differentiation into CD1a(+) DCs and inducing endogenous PGE(2), IDO1, IL-4Rα, NOS2, and IL-10, typical MDSC-associated suppressive factors. The addition of PGE(2) to GM-CSF/IL-4-supplemented monocyte cultures is sufficient to induce the MDSC phenotype and cytotoxic T lymphocyte (CTL)-suppressive function. In accordance with the key role of PGE(2) in the physiologic induction of human MDSCs, the frequencies of CD11b(+)CD33(+) MDSCs in ovarian cancer are closely correlated with local PGE(2) production, whereas the cancer-promoted induction of MDSCs is strictly COX2 dependent. The disruption of COX2-PGE(2) feedback using COX2 inhibitors or EP2 and EP4 antagonists suppresses the production of MDSC-associated suppressive factors and the CTL-inhibitory function of fully developed MDSCs from cancer patients. The central role of COX2-PGE(2) feedback in the induction and persistence of MDSCs highlights the potential for its manipulation to enhance or suppress immune responses in cancer, autoimmunity, or transplantation.