Myeloid-derived suppressor cells (MDSC) are pathologically activated neutrophils and monocytes with potent immune suppressive activity. These cells play an important role in accelerating tumor progression and undermining the efficacy of anti-cancer therapies. The natural mechanisms limiting MDSC activity are not well understood. Here, we present evidence that type I interferons (IFN1) receptor signaling serves as a universal mechanism that restricts acquisition of suppressive activity by these cells. Downregulation of the IFNAR1 chain of this receptor is found in MDSC from cancer patients and mouse tumor models. The decrease in IFNAR1 depends on the activation of the p38 protein kinase and is required for activation of the immune suppressive phenotype. Whereas deletion of IFNAR1 is not sufficient to convert neutrophils and monocytes to MDSC, genetic stabilization of IFNAR1 in tumor bearing mice undermines suppressive activity of MDSC and has potent antitumor effect. Stabilizing IFNAR1 using inhibitor of p38 combined with the interferon induction therapy elicits a robust anti-tumor effect. Thus, negative regulatory mechanisms of MDSC function can be exploited therapeutically.