Accumulation of myeloid-derived suppressor cells (MDSCs) associated with inhibition of dendritic cell (DC) differentiation is one of the major immunological abnormalities in cancer and leads to suppression of antitumor immune responses. The molecular mechanism of this phenomenon remains unclear. We report here that STAT3-inducible up-regulation of the myeloid-related protein S100A9 enhances MDSC production in cancer. Mice lacking this protein mounted potent antitumor immune responses and rejected implanted tumors. This effect was reversed by administration of wild-type MDSCs from tumor-bearing mice to S100A9-null mice. Overexpression of S100A9 in cultured embryonic stem cells or transgenic mice inhibited the differentiation of DCs and macrophages and induced accumulation of MDSCs. This study demonstrates that tumor-induced up-regulation of S100A9 protein is critically important for accumulation of MDSCs and reveals a novel molecular mechanism of immunological abnormalities in cancer.