Background: Monocytic myeloid-derived suppressor cells (M-MDSCs) are significantly expanded in the blood of colorectal cancer (CRC) patients. However, their presence and underlying mechanisms in the tumour microenvironment of CRC have not been examined in detail. Methods: Tumour tissues and peripheral blood from CRC patients were analysed for the presence of M-MDSCs. The mechanisms of suppression were analysed by blocking pathways by which MDSCs abrogate T cell proliferation. Co-culture of CRC cells with monocytes were performed with and without cytokine blocking antibodies to determine the mechanism by which CRC cells polarise monocytes. Multi-spectral IHC was used to demonstrate the intra-tumoral location of M-MDSCs. Results: Tumour tissues and blood of CRC patients contain M-MDSCs which inhibit T cell proliferation. Whilst inhibition of arginase and nitric oxide synthase 2 fail to rescue T cell proliferation, blockade of IL-10 released by these HLA-DR- cells abrogates the suppresivity of M-MDSCs. Tumour conditioned media (TCM) significantly reduces HLA-DR expression, increases IL-10 release from monocytes and causes them to become suppressive. TGF-β is highly expressed in the TCM and accumulates in the plasma. TGF-β reduces HLA-DR expression and drives monocyte immunosuppressivity. The invasive margin of CRC is enriched in CD14+ HLA-DR- cells in close proximity to T cells. Conclusions: Our study demonstrates the cross-talk between CRC cells, M-MDSCs and T cells. Characterisation of CRC M-MDSCs point to therapeutic avenues to target these cells in addition to TGF-β blockade.Keywords: Colorectal cancer; IL-10; M-MDSCs; TGFβ; pSTAT3.