Peroxisome proliferator–activated receptor-γ (PPARγ) is an anti-inflammatory molecule. To study its biologic function in myeloid cells, dominant-negative PPARγ (dnPPARγ) was overexpressed in a myeloid-specific bitransgenic mouse model. In this bitransgenic system, overexpression of the dnPPARγ-Flag fusion protein in myeloid-lineage cells abnormally elevated frequencies and total numbers of IL-7Rα⁻Lin⁻c-Kit⁺Sca-1⁻, Lin⁻/Scal⁺/c-Kit⁺, common myeloid, and granulocyte-monocyte progenitor populations in the BM. dnPPARγ overexpression led to up-regulation of IL-1β, IL-6, and TNFα in the blood plasma. As a result, CD11b⁺Ly6G⁺ cells were systemically increased in association with activation of Stat3, NF-κB, Erk1/2, and p38 molecules. Myeloid-derived suppressor cells (MDSCs) inhibited the proliferation and lymphokine production of wild-type CD4⁺ T cells in vitro. CD4⁺ T cells from doxycycline-treated bitransgenic mice displayed reduced proliferation and lymphokine release. Both CD4⁺ and CD8⁺ T-cell populations were decreased in doxycycline-treated bitransgenic mice. Multiple forms of carcinoma and sarcoma in the lung, liver, spleen, and lymph nodes were observed in doxycycline-treated bitransgenic mice. BM transplantation revealed that a myeloid-autonomous defect was responsible for MDSC expansion, immunosuppression, and tumorigenesis in these mice. These studies suggest that anti-inflammatory PPARγ in myeloid-lineage cells plays a key role in controlling pro-inflammatory cytokine synthesis, MDSC expansion, immunosuppression, and the development of cancer.