Abstract Myeloid-derived suppressor cells (MDSC) are immature myeloid cells that accumulate in the tumor microenvironment (TME). MDSCs have been shown to dampen antitumor immune responses and promote tumor growth; however, the mechanisms of MDSC induction and their role in promoting immune suppression in cancer remain poorly understood. Here, we characterized the phenotype and function of monocytic MDSCs (M-MDSC) generated by coculture of human peripheral blood mononuclear cells with SK-MEL-5 cancer cells in vitro. We selected the SK-MEL-5 human melanoma cell line to generate M-MDSCs because these cells form subcutaneous tumors rich in myeloid cells in humanized mice. M-MDSCs generated via SK-MEL-5 coculture expressed low levels of human leukocyte antigen (HLA)-DR, high levels of CD33 and CD11b, and suppressed both CD8+ T-cell proliferation and IFNγ secretion. M-MDSCs also expressed higher levels of immunoglobulin-like transcript 3 (ILT3, also known as LILRB4) and immunoglobulin-like transcript 4 (ILT4, also known as LILRB2) on the cell surface compared with monocytes. Therefore, we investigated how ILT3 targeting could modulate M-MDSC cell function. Treatment with an anti-ILT3 antibody impaired the acquisition of the M-MDSC suppressor phenotype and reduced the capacity of M-MDSCs to cause T-cell suppression. Finally, in combination with anti-programmed cell death protein 1 (PD1), ILT3 blockade enhanced T-cell activation as assessed by IFNγ secretion. Implications: These results suggest that ILT3 expressed on M-MDSCs has a role in inducing immunosuppression in cancer and that antagonism of ILT3 may be useful to reverse the immunosuppressive function of M-MDSCs and enhance the efficacy of immune checkpoint inhibitors.