Our group and others have determined that immune effector cells from patients with advanced cancers exhibit reduced activation of IFN signaling pathways. We hypothesized that increases in immune regulatory cells termed myeloid-derived suppressor cells (MDSC) could interfere with the host immune response to tumors by inhibiting immune cell responsiveness to IFNs. The C26 murine adenocarcinoma model was employed to study immune function in advanced malignancy. C26-bearing mice had significantly elevated levels of GR1⁺CD11b⁺ MDSC as compared with control mice, and splenocytes from tumor-bearing mice exhibited reduced phosphorylation of STAT1 (P-STAT1) on Tyr⁷⁰¹ in response to IFN-α or IFN-γ. This inhibition was seen in splenic CD4⁺ and CD8⁺ T cells as well as natural killer cells. In vitro coculture experiments revealed that MDSC inhibited the IFN responsiveness of splenocytes from normal mice. Treatment of C26-bearing mice with gemcitabine or an anti-GR1 antibody led to depletion of MDSC and restored splenocyte IFN responsiveness. Spleens from C26-bearing animals displayed elevated levels of iNOS protein and nitric oxide. In vitro treatment of splenocytes with a nitric oxide donor led to a decreased STAT1 IFN response. The elevation in nitric oxide in C26-bearing mice was associated with increased levels of nitration on STAT1. Finally, splenocytes from iNOS knockout mice bearing C26 tumors exhibited a significantly elevated IFN response as compared with control C26 tumor-bearing mice. These data suggest that nitric oxide produced by MDSC can lead to reduced IFN responsiveness in immune cells. Cancer Res; 71(15); 5101–10. ©2011 AACR.