A major barrier to successful cancer immunotherapy is the tumor's ability to induce T-cell tolerance by exploiting host regulatory mechanisms. Having discovered the DC-HIL receptor, which inhibits T-cell responses by binding to syndecan-4 on effector T cells, we posited the DC-HIL/syndecan-4 pathway to have an important role in cancer promotion. Among DC-HIL(+) myelomonocytic cells, during growth of implanted mouse melanoma, CD11b(+)Gr1(+) cells were the most expanded population and the most potent at suppressing T-cell activation. Deletion of the DC-HIL gene or infusion of anti-DC-HIL mAb abrogated these cells' suppressor function and expansion, and markedly diminished melanoma growth and metastasis. IL-1β and IFN-γ were elevated in mice bearing melanoma, and concurrent exposure to both cytokines optimally induced DC-HIL expression by tumor-infiltrating CD11b(+)Gr1(+) cells. Ligation of DC-HIL transduced phosphorylation of its intracellular immunoreceptor tyrosine-based activation motif, which in turn induced intracellular expression of IFN-γ and inducible nitric oxide synthase (iNOS), known to mediate T-cell suppression by CD11b(+)Gr1(+) cells. Thus, DC-HIL is the critical mediator of these cells' suppressor function in melanoma-bearing mice and a potential target for improving melanoma immunotherapy.