Myeloid-derived suppressor cells (MDSC) potently inhibit antitumor immune responses, and thereby promoti tumor progression and metastasis. However, the nature of human tumor-infiltrating MDSC remains poorly characterized. Here, we find B7-H3 is exclusively expressed on a subset of intratumoral CD14⁺HLA-DR^−/low MDSC but absent from adjacent normal lung tissues of patients with non-small cell lung carcinoma (NSCLC). Cytokine analysis revealed that B7-H3⁺CD14⁺HLA-DR^−/low MDSC (B7-H3⁺MDSC) produced higher levels of IL-10 and TNFα but lower levels of IL-1β and IL-6 when compared with B7-H3⁻CD14⁺HLA-DR^−/low myeloid-derived suppressor cells (B7-H3⁻MDSC). In a murine lung cancer model, B7-H3⁺MDSCs were found only in the tumor microenvironment and their frequencies increased during tumor progression. Clinical data analysis indicated that a higher frequency of B7-H3⁺MDSCs was associated with reduced recurrence-free survival in patients with NSCLC. Taken together, we identify a novel subset of MDSCs within the tumor microenvironment that fosters tumor progression.