Myeloid derived suppressor cells (MDSCs) are a heterogenous population of immature hematopoietic precursors with known immunoregulatory functions. The immunosuppressive role of MDSCs has been highlighted in several inflammatory ophthalmic disorders; however, their therapeutic application in suppressing the immune-mediated changes in dry eye disease (DED) has not been studied. We observed significant reduction in antigen presenting cell (APC) frequencies and their maturation in the presence of MDSCs. Moreover, co-culturing MDSCs with T helper 17 cells (Th17) resulted in reduced Th17 frequencies and their IL-17 expression. On the contrary, MDSCs maintained regulatory T cell frequencies and enhanced their function in-vitro. Furthermore, we delineated the role of interleukin-10 (IL-10) secreted by MDSCs in their immunoregulatory functions. We confirmed these results by flow cytometry analysis and observed that treatment with MDSCs in DED mice effectively suppressed the maturation of APCs, pathogenic Th17 response, and maintained Treg function and significantly ameliorated the disease. The results in this study highlight the potential therapeutic application of MDSCs in treating refractory DED.