The immunosuppressive tumor microenvironment (TME) is a major barrier to immunotherapy. Within solid tumors, why monocytes preferentially differentiate into immunosuppressive tumor-associated macrophages (TAMs) rather than immunostimulatory dendritic cells (DCs) remains unclear. Using multiple murine sarcoma models, we find that the TME induces tumor cells to produce retinoic acid (RA), which polarizes intratumoral monocyte differentiation toward TAMs and away from DCs via suppression of DC-promoting transcription factor Irf4. Genetic inhibition of RA production in tumor cells or pharmacologic inhibition of RA signaling within TME increases stimulatory monocyte-derived cells, enhances T cell-dependent anti-tumor immunity, and synergizes with immune checkpoint blockade. Furthermore, an RA-responsive gene signature in human monocytes correlates with an immunosuppressive TME in multiple human tumors. RA has been considered as an anti-cancer agent, whereas our work demonstrates its tumorigenic capability via myeloid-mediated immune suppression and provides proof of concept for targeting this pathway for tumor immunotherapy.