Although macrophages (Mφs) mediate tumor cytotoxicity, display tumor‐associated antigens, and stimulate antitumor lymphocytes, cancer cells routinely circumvent these host‐mediated immune activities, rendering the host incapable of mounting a successful antitumor immune response. Evidence supporting a direct causal relationship between cancer and immune dysfunction suggests that the presence of neoplastic tissue leads to immunologic degeneration. Furthermore, substantial data demonstrate that tumor growth adversely alters Mφ function and phenotype. Thus, although Mφs can serve as both positive and negative mediators of the immune system, the importance of Mφs in tumor‐induced immune suppression remains controversial. This review focuses on the evidence that tumor‐derived molecules redirect Mφ activities to promote tumor development. Tumors produce cytokines, growth factors, chemotactic molecules, and proteases that influence Mφ functions. Many tumor‐derived molecules, such as IL‐4, IL‐6, IL‐10, MDF, TGF‐β₁, PGE₂, and M‐CSF, deactivate or suppress the cytotoxic activity of activated Mφs. Evidence that tumor‐derived molecules modulate Mφ cytotoxicity and induce Mφ suppressor activity is presented. This information further suggests that Mφs in different in vivo compartments may be differentially regulated by tumor‐derived molecules, which may deactivate tumor‐proximal (in situ) Mφ populations while concurrently activating tumordistal Mφs, imparting a twofold insult to the host's antitumor immune response. J. Leukoc. Biol. 64: 275–290; 1998.