Myeloid-derived suppressor cells (MDSC) are pathologically activated neutrophils and monocytes with potent immune suppressive activity. These cells play an important role in tumor progression and limit the efficacy of cancer therapies. Whereas many pathways stimulate the generation of MDSC, the key natural mechanisms restricting these processes are not well understood. Here, we present evidence that type I interferons (IFN1) receptor signaling in neutrophils and monocytes serves as a universal mechanism that restrict acquisition of suppressive activity by these cells. Downregulation of the IFNAR1 receptor and inactivation of the IFN1 pathway was found in MDSC from cancer patients and several mouse tumor models. The decrease in IFNAR1 depended on the activation of the p38 kinase and was required for activation of the immune suppressive phenotype. Genetic manipulation of IFNAR1 that prevents its degradation and retains signaling, completely abrogated generation of MDSC in tumor-bearing mice and had potent antitumor effect. Deletion of IFNAR1 was not sufficient to convert neutrophils and monocytes to MDSC. Stabilizing IFNAR1 using p38 inhibitor combined with the interferon induction therapy using Poly:IC elicited a robust anti-tumor effect. Thus, negative regulatory mechanisms of MDSC function can be exploited therapeutically.