PD-1 checkpoint inhibitor induces T cell inactivation by recruiting SHP-2. However, T cell-specific SHP-2-deficient mice do not have improved anti-tumor immunity. We generated mice with conditional targeting of the Ptpn11 gene (encoding for Shp-2) in T cells (Shp2f/fLckCre) or myeloid cells (Shp2f/fLysMCre), and found that Shp2f/fLysMCre mice had diminished tumor growth. As determined by RNA-seq, this was paralleled by the presence of inflammatory neutrophils and tumor-associated macrophages (TAMs) with molecular signatures of enhanced differentiation, phagocytosis and antigen-processing and presentation. SHP-2 deficient TAMs also had increased monocyte and dendritic cell (DC) specification transcription factors, chemokine and cytokine production, and expression of immunostimulatory molecules that promote T cell recruitment and activation. Monocytes from tumor-bearing Shp2f/fLysMCre mice suppressed tumor growth after transfer to naïve recipients indicating development of innate immune memory. In bone marrow myelocytes, GM-CSF, induced PD-1 expression, phosphorylation and interaction with SHP-2, the Src family kinase Lyn, and GM-CSF receptor beta chain, indicating that the PD-1:SHP-2 axis targets a key pathway of myelocyte differentiation. In contrast, SHP-2 deletion or antibody-mediated blockade of the PD-1:PD-L1 pathway enhanced phosphorylation of the transcription factors HOXA10 and IRF8 that regulate myeloid differentiation and monocytic/moDC lineage commitment, respectively. Thus, SHP-2 and the PD-1:SHP-2 axis pose a signaling restrain to myeloid differentiation and monocyte lineage commitment resulting in a myeloid landscape that suppresses anti-tumor immunity.