Suppressor of cytokine signaling (SOCS) proteins are negative regulators of the JAK/STAT pathway and generally function as tumor suppressors. The absence of SOCS3 in particular leads to heightened activation of the STAT3 transcription factor, which has a striking ability to promote tumor survival while suppressing antitumor immunity. We report for the first time that genetic deletion of SOCS3, specifically in myeloid cells, significantly enhances tumor growth, which correlates with elevated levels of myeloid-derived suppressor cells (MDSC) in the tumor microenvironment, and diminishes CD8+ T-cell infiltration in tumors. The importance of MDSCs in promoting tumor growth is documented by reduced tumor growth upon depletion of MDSCs. Furthermore, SOCS3-deficient bone-marrow-derived cells exhibit heightened STAT3 activation and preferentially differentiate into the Gr-1+CD11b+Ly6G+ MDSC phenotype. Importantly, we identify G-CSF as a critical factor secreted by the tumor microenvironment that promotes development of MDSCs via a STAT3-dependent pathway. Abrogation of tumor-derived G-CSF reduces the proliferation and accumulation of Gr-1+CD11b+ MDSCs and inhibits tumor growth. These findings highlight the critical function of SOCS3 as a negative regulator of MDSC development and function via inhibition of STAT3 activation.