Defective immune function is an important cause of tumor development. Accumulation of myeloid-derived suppressor cell (MDSC) associated with inhibition of dendritic cell (DC) function is one of the major immunological abnormalities in cancer. However, the molecular mechanism of the phenomenon remains unclear. We evaluated T cell stimulatory activity and interleukin (IL)-12 production of DC in a mouse model of liver cancer (hepatocellular carcinoma [HCC] mice). Then we detected the frequency of MDSC in spleen, peripheral blood (PB), lymph node (LN) and tumor tissue of HCC mice and its potential mechanisms. We also evaluated IL-10 production of MDSC and mechanism by which MDSC inhibit DC function. Toll-like receptor (TLR)-ligand (LPS, CpG, poly(I:C))-induced IL-12 production of DC was decreased in HCC mice compared with control. The T cell stimulatory activity of DC was lower in HCC mice than in controls. Meanwhile, an increase in the frequency of MDSC in tumor development was detected in spleen, PB, LN and tumor, and the IL-10 levels were higher in HCC mice derived MDSC than in control. Furthermore, the MDSC inhibited TLR-ligand-induced IL-12 production of DC by IL-10 production and suppressed T cell stimulatory activity of DC. Finally, we demonstrated that the increase in the frequency of MDSC was mediated by MyD88–NF-kB pathway. Our study suggests a new role for MDSCs in HCC development by suppressing host immune responses, and these findings have important implications when designing immunotherapy protocols.