Immune checkpoint inhibitor (ICI) therapy is effective against many cancers for a subset of patients; a large percentage of patients remain unresponsive to this therapy. One contributing factor to ICI resistance is accumulation of monocytic myeloid-derived suppressor cells (M-MDSCs), a subset of innate immune cells with potent immunosuppressive activity against T lymphocytes. Here, using lung, melanoma, and breast cancer mouse models, we show that CD73-expressing M-MDSCs in the tumor microenvironment (TME) exhibit superior T cell suppressor function. Tumor-derived PGE2, a prostaglandin, directly induces CD73 expression in M-MDSCs via both Stat3 and CREB. The resulting CD73 overexpression induces elevated levels of adenosine, a nucleoside with T cell-suppressive activity, culminating in suppression of antitumor CD8+ T cell activity. Depletion of adenosine in the TME by the repurposed drug PEGylated adenosine deaminase (PEG-ADA) increases CD8+ T cell activity and enhances response to ICI therapy. Use of PEG-ADA can therefore be a therapeutic option to overcome resistance to ICIs in cancer patients.