OBJECTIVE : Efficient production of monocytic myeloid-derived suppressor cells (M-MDSCs) with stable immunosuppressive function is crucial for immunomodulatory cell therapy for many diseases such as transplant rejection, graft-versus-host disease and autoimmune diseases. METHODS : We used M-CSF as growth factor for myeloid progenitor cell differentiation and activated them with IFN-γ during early stage in vitro to produce M-MDSCs. The cell phenotypes were determined using flow cytometry, the immunosuppressive function and mechanisms were determined by skin grafted mouse models and genetic modified mice. RESULTS : IFN-γ treatment endows these cell strong immunosuppressive function by inhibition of T cell proliferation and cytokine productions. The phenotype of these cells also changed towards M-MDSCs. IFN-γ significantly upregulated iNOS expression in these M-MDSCs and inhibition of this molecule significantly reversed their immune regulatory function. The functional stability of induced M-MDSCs by IFN-γ was tested in vivo by transferring them to alloskin-grafted mice. Adoptive transfer of these cells significantly prolonged allograft survival and promoted immune tolerance, whereas iNOS deficiency in these cells reversed this effect. CONCLUSIONS : We established one M-MDSCs-inducting protocol with the combination of M-CSF and IFN-γ in vitro. M-CSF+IFN-γ-induced M-MDSCs are promising to prevent graft rejection by immune regulation.