Previous studies had implicated the IFN-γ transcription factor signal transducer and activator of transcription 1 (STAT1) as a tumor suppressor. However, accumulating evidence has correlated increased STAT1 activation with increased tumor progression in multiple types of cancer, including breast cancer. Indeed, we present evidence that tumor up-regulation of STAT1 activity in human and mouse mammary tumors correlates with increasing disease progression to invasive carcinoma. A microarray analysis comparing low aggressive TM40D and highly aggressive TM40D-MB mouse mammary carcinoma cells revealed significantly higher STAT1 activity in the TM40D-MB cells. Ectopic overexpression of constitutively active STAT1 in TM40D cells promoted mobilization of myeloid-derived suppressor cells (MDSCs) and inhibition of antitumor T cells, resulting in aggressive tumor growth in tumor-transplanted, immunocompetent mice. Conversely, gene knockdown of STAT1 in the metastatic TM40D-MB cells reversed these events and attenuated tumor progression. Importantly, we demonstrate that in human breast cancer, the presence of tumor STAT1 activity and tumor-recruited CD33(+) myeloid cells correlates with increasing disease progression from ductal carcinoma in situ to invasive carcinoma. We conclude that STAT1 activity in breast cancer cells is responsible for shaping an immunosuppressive tumor microenvironment, and inhibiting STAT1 activity is a promising immune therapeutic approach.