Interleukin-10 (IL-10) is a broadly acting immune inhibitory cytokine that is generally thought to support tumor growth. Here we challenge this view with evidence that genetic ablation of IL-10 in the mouse significantly heightens sensitivity to chemical carcinogenesis, growth of transplanted tumors, and formation of metastases. Tumor growth in IL-10–deficient (IL-10^−/−) mice was associated with an increased level of myeloid-derived suppressor cells (MDSC) and CD4⁺Foxp3⁺ regulatory T (Treg) cells in both the tumor microenvironment and the tumor-draining lymph nodes. IL-10^−/− MDSCs express high levels of MHC and IL-1, and they efficiently induced formation of Treg cells. IL-1 signaling blockade reduced tumor growth mediated by IL-10 deficiency, associated with a partial rescue of tumor infiltration and function of effector T cells and a decrease in tumor angiogenesis and tumor infiltration by Treg cells. Taken together, our findings establish that endogenous IL-10 inhibits inflammatory cytokine production and hampers the development of Treg cells and MDSCs, two key components of the immunosuppressive tumor microenvironment, thereby inhibiting tumor development, growth, and metastasis. Cancer Res; 72(2); 420–9. ©2011 AACR.