Defective dendritic cell (DC) function caused by abnormal differentiation of these cells is an important mechanism of tumor escape from immune system control. Previously, we have demonstrated that the number and function of DC were dramatically reduced in cancer patients. This effect was closely associated with accumulation of immature cells (ImC) in peripheral blood. In this study, we investigated the nature and functional role of those ImC. Using flow cytometry, electron microscopy, colony formation assays, and cell differentiation in the presence of different cell growth factors, we have determined that the population of ImC is composed of a small percentage (< 2%) of hemopoietic progenitor cells, with all other cells being represented by MHC class I-positive myeloid cells. About one-third of ImC were immature macrophages and DC, and the remaining cells were immature myeloid cells at earlier stages of differentiation. These cells were differentiated into mature DC in the presence of 1 μM all-trans-retinoic acid. Removal of ImC from DC fractions completely restored the ability of the DC to stimulate allogeneic T cells. In two different experimental systems ImC inhibited Ag-specific T cell responses. Thus, immature myeloid cells generated in large numbers in cancer patients are able to directly inhibit Ag-specific T cell responses. This may represent a new mechanism of immune suppression in cancer and may suggest a new approach to cancer treatment.