Myeloid-derived suppressor cells (MDSC) and regulatory T cells (Treg) play an essential role in the immunosuppressive networks that contribute to tumor immune evasion. The mechanisms by which tumors promote the expansion and/or function of these suppressive cells and the cross-regulation between MDSC and Treg remain incompletely defined. The current work evaluates the influence of MDSC, expanded in two mouse cancer models, on immunosuppressive Treg. We demonstrate that tumor-induced MDSC endowed with the potential of suppressing conventional T lymphocytes surprisingly impair TGF-β1-mediated generation of induced Treg (iTreg) from naïve CD4⁺ T lymphocytes. Suppression of iTreg generation by MDSC occurs early in the differentiation process, and is cell contact dependent. This inhibition of FoxP3-expressing T lymphocyte differentiation by MDSC does not depend on arginase 1, cystine/cysteine depletion, iNOS/NO, or PD-1/PD-L1 signaling. These findings therefore indicate that MDSC from tumor-bearing hosts have the heretofore unreported ability to restrict some immunosuppressive Treg subpopulations.