Background: Cellular therapy has emerged as a promising strategy to minimize conventional immunosuppressive drugs and ultimately induce long-term graft survival. Myeloid-derived suppressor cells (MDSCs) could be utilized for immunosuppressive treatment in solid organ transplant. Methods: In this study, granular macrophage colony-stimulating factor (GM-CSF) and Bexarotene, a retinoid X receptor-selective retinoid, was applied for in vitro induction of MDSCs. Cell phenotypes were detected by flow cytometry and mRNA was detected by real-time PCR. A mouse skin transplantation model was used to verify its inhibitory role. Results: The combination of GM-CSF and Bexarotene could induce the differentiation of myeloid-derived suppressor cells. MDSCs were found to induce immune tolerance by inhibiting the proliferation of T cells, influencing cytokine secretion, and inducing T cell transformation to Treg cells. The combined treatment significantly up-regulated the expression of Arg-1 in MDSCs. Arg-1 inhibitor, nor-NOHA, neutralize the immunosuppressive activity of MDSCs, suggesting the involvement of the Arg-1 in MDSC mediated immunosuppression. GM-CSF and Bexarotene induced MDSCs also prolonged the graft survival in moues skin transplant, exhibiting their in vivo immunosuppressive effects. Conclusions: A new method of inducing MDSCs is presented. The combination of GM-CSF and Bexarotene could induce MDSCs with remarkable regulatory function. The adoptive transfer of the these induced MDSCs extended the survival of allografts. These results suggested that MDSCs could potentially be applied in future clinical transplantation for inhibiting rejection, reducing the adverse events and even inducing operative tolerance.