Signal transducer and activator of transcription 3 (Stat3) is a potent transcription factor with diverse biological functions. Overexpression of constitutively active form Stat3C in lung alveolar type II (AT II) epithelial cells in CCSP-rtTA/(tetO)₇-CMV-Stat3C bitransgenic mice induces chronic inflammation and lung bronchioalveolar adenocarcinoma. In the present study, the population of CD11b⁺Gr-1⁺ myeloid-derived suppressor cells (MDSCs) was significantly increased in lung and blood of doxycycline-treated bitransgenic mice, but CD4⁺ and CD8⁺ T cells were decreased. In bronchioalveolar lavage fluid and plasma of doxycycline-treated bitransgenic mice, concentrations of MDSC-stimulating cytokines IL-1β, IL-6, IL-10, IL-13, INF-γ, TNF-α, and GM-CSF were significantly increased, which stimulated alveolar monocytes/macrophages to CD11b⁺Gr-1⁺ cell conversion in vitro. Phosphorylation of proto-oncogenic intracellular signaling molecules Stat3, Erk1/2, and P38 was significantly increased in CD11b⁺Gr-1⁺ cells from lung and blood of doxycycline-treated bitransgenic mice. CD11b⁺Gr-1⁺ cells from lung of doxycycline-treated bitransgenic mice strongly inhibited proliferation and function of wild-type CD4⁺ T cells in vitro. These findings support the concept that persistent activation of Stat3 induces inflammation during lung cancer by promoting MDSC-mediated immune suppression.