Transforming growth factor β (TGFβ) is an effector of immune suppression and contributes to a permissive tumor microenvironment that compromises effective immunotherapy. We identified a correlation between TGFB1 and genes expressed by myeloid cells, but not granulocytes, in The Cancer Genome Atlas lung adenocarcinoma data, in which high TGFB1 expression was associated with poor survival. To determine whether TGFβ affected cell fate decisions and lineage commitment, we studied primary cultures of CD14+ monocytes isolated from peripheral blood of healthy donors. We discovered that TGFβ was a survival factor for CD14+ monocytes, which rapidly executed an apoptotic program in its absence. Continued exposure to TGFβ in combination with granulocyte-macrophage colony stimulating factor (GM-CSF) and interleukin 6 (IL6) amplified HLA-DRlowCD14+CD11b+CD33+ myeloid-derived suppressor cells (MDSCs) at the expense of macrophage and dendritic cell (DC) differentiation. MDSCs generated in the presence of TGFβ were more effective in suppressing T-cell proliferation and promoted the T regulatory cell phenotype. In contrast, inhibition of TGFβ signaling using a small-molecule inhibitor of receptor kinase activity in CD14+ monocytes treated with GM-CSF and IL6 decreased MDSC differentiation and increased differentiation to proinflammatory macrophages and antigen-presenting DCs. The effect of autocrine and paracrine TGFβ on myeloid cell survival and lineage commitment suggests that pharmacologic inhibition of TGFβ-dependent signaling in cancer would favor antitumor immunity.