We have identified a precursor that differentiates into granulocytes in vitro and in vivo yet belongs to the monocytic lineage. We have termed these cells monocyte-like precursors of granulocytes (MLPGs). Under steady state conditions, MLPGs were absent in the spleen and barely detectable in the bone marrow (BM). In contrast, these cells significantly expanded in tumor-bearing mice and differentiated to polymorphonuclear myeloid-derived suppressor cells (PMN-MDSCs). Selective depletion of monocytic cells had no effect on the number of granulocytes in naive mice but decreased the population of PMN-MDSCs in tumor-bearing mice by 50%. The expansion of MLPGs was found to be controlled by the down-regulation of Rb1, but not IRF8, which is known to regulate the expansion of PMN-MDSCs from classic granulocyte precursors. In cancer patients, putative MLPGs were found within the population of CXCR1+CD15−CD14+HLA-DR−/lo monocytic cells. These findings describe a mechanism of abnormal myelopoiesis in cancer and suggest potential new approaches for selective targeting of MDSCs.