SLAMF7 is expressed mainly on multiple myeloma (MM) cells and considered an ideal target for immunotherapeutic approaches. Indeed, elotuzumab, an anti-SLAMF7 antibody, is used for the treatment of MM in combination with immunomodulatory drugs. SLAMF7 is cleaved via unknown mechanisms and detected as a soluble form (sSLAMF7) exclusively in the serum of MM patients; however, little is known about the role of sSLAMF7 in MM biology. In this study, we found that sSLAMF7 enhanced the growth of MM cells via homophilic interaction with surface SLAMF7 and subsequent activation of the SHP-2 and ERK signaling pathways. Elotuzumab suppressed sSLAMF7-induced MM cell growth both in vitro and in vivo. Promoter analyses identified IKZF1 (Ikaros) as a pivotal transcriptional activator of the SLAMF7 gene. Pharmacological targeting of Ikaros by lenalidomide and its analog pomalidomide downregulated SLAMF7 expression and ameliorated the response of MM cells to sSLAMF7. Elotuzumab blocked the growth-promoting function of sSLAMF7 when combined with lenalidomide in a murine xenograft model. Neutralization of sSLAMF7 is a novel antimyeloma mechanism of elotuzumab, which is enhanced by immunomodulatory drugs via downregulation of surface SLAMF7 expression on MM cells. These findings may provide important information for the optimal use of elotuzumab in MM treatment.