Hedgehog signaling in cancer cells drives changes in the tumor microenvironment that are incompletely understood. Here, we report that hedgehog-driven tumors exhibit an increase in myeloid-derived suppressor cells (MDSC) and a decrease in T cells, indicative of an immunosuppressive tumor microenvironment. This change was associated with activated TGF-β signaling in several cell types in basal cell carcinomas. We determined that TGF-β signaling in bone marrow-derived cells, not keratinocytes, regulates MDSC and promotes tumor development. Tgfbr2 deficiency in the bone marrow-derived cells also reduced the size of previously developed tumors in mice. We identified CCL2 as the major chemokine attracting MDSCs to tumor, whose expression was Tgfbr2-dependent, whereas its receptor CCR2 was highly expressed in MDSC population. CCL2 alone was sufficient to induce migration of MDSCs. Moreover, the CCR2 inhibitors prevented MDSC migration toward skin cells in vitro, and reduced MDSC accumulation and hedgehog signaling-driven tumor development in mice. Our results reveal a signaling network critical for hedgehog signaling in cancer cells to establish an effective immunosuppressive microenvironment during tumor development.