A hostile microenvironment in tumor tissues disrupts endoplasmic reticulum homeostasis and induces the unfolded protein response (UPR). A chronic UPR in both cancer cells and tumor-infiltrating leukocytes could facilitate the evasion of immune surveillance. However, how the UPR in cancer cells cripples the anti-tumor immune response is unclear. Here, we demonstrate that, in cancer cells, the UPR component X-box binding protein 1 (XBP1) favors the synthesis and secretion of cholesterol, which activates myeloid-derived suppressor cells (MDSCs) and causes immunosuppression. Cholesterol is delivered in the form of small extracellular vesicles and internalized by MDSCs through macropinocytosis. Genetic or pharmacological depletion of XBP1 or reducing the tumor cholesterol content remarkably decreases MDSC abundance and triggers robust anti-tumor responses. Thus, our data unravel the cell-non-autonomous role of XBP1/cholesterol signaling in the regulation of tumor growth and suggest its inhibition as a useful strategy for improving the efficacy of cancer immunotherapy.