Although dendritic cell (DC) dysfunction in cancer is a well-recognized consequence of cancer-associated inflammation that contributes to immune evasion, the mechanisms that drive this process remain elusive. Here, we show the critical importance of tumor-derived TLR2 ligands in the generation of immunosuppressive IL-10-producing human and mouse DCs. TLR2 ligation induced two parallel synergistic processes that converged to activate STAT3: stimulation of autocrine IL-6 and IL-10 and upregulation of their respective cell surface receptors, which lowered the STAT3 activation threshold. We identified versican as a soluble tumor-derived factor that activates TLR2 in DCs. TLR2 blockade in vivo improved intra-tumor DC immunogenicity and enhanced the efficacy of immunotherapy. Our findings provide a basis for understanding the molecular mechanisms of DC dysfunction in cancer and identify TLR2 as a relevant therapeutic target to improve cancer immunotherapy.