Despite the unprecedented success of immune checkpoint inhibitors (ICIs) as anti-cancer therapy, it remains a prevailing clinical need to identify additional mechanisms underlying ICI therapeutic efficacy and potential drug resistance. Here, using lineage tracking in cancer patients and tumor-bearing mice, we demonstrate that erythroid progenitor cells lose their developmental potential and switch to the myeloid lineage. Single-cell transcriptome analyses reveal that, notwithstanding quantitative differences in erythroid gene expression, erythroid differentiated myeloid cells (EDMCs) are transcriptionally indistinguishable from their myeloid-originated counterparts. EDMCs possess multifaceted machinery to curtail T cell-mediated anti-tumor responses. Consequently, EDMC content within tumor tissues is negatively associated with T cell inflammation for the majority of solid cancers; moreover, EDMC enrichment, in accordance with anemia manifestation, is predictive of poor prognosis in various cohorts of patients undergoing ICI therapy. Together, our findings reveal a feedforward mechanism by which tumors exploit anemia-triggered erythropoiesis for myeloid transdifferentiation and immunosuppression. Keywords: MDSCs; anti-tumor immunity; cancer immunotherapy; erythroid progenitors; extramedullary erythropoiesis; immune checkpoint inhibitors; immune-oncology; immunosuppression; myeloid-derived suppressor cells; myelopoiesis; transdifferentiation; tumor microenvironment.