Aryl hydrocarbon receptor (AhR) is a ligand-activated transcription factor and 2,3,7,8-tetrachlorodibenzo-p-dioxin (TCDD) is a potent ligand for AhR and a known carcinogen. While AhR activation by TCDD leads to significant immunosuppression, how this translates into carcinogenic signal is unclear. Recently, we demonstrated that activation of AhR by TCDD in naïve C57BL6 mice leads to massive induction of myeloid derived-suppressor cells (MDSCs). In the current study, we investigated the role of the gut microbiota in TCDD-mediated MDSC induction. TCDD caused significant alterations in the gut microbiome, such as increases in Prevotella and Lactobacillus, while decreasing Sutterella and Bacteroides. Fecal transplants from TCDD-treated donor mice into antibiotic-treated mice induced MDSCs and increased regulatory T-cells (Tregs). Injecting TCDD directly into antibiotic-treated mice also induced MDSCs, although to a lesser extent. These data suggested that TCDD-induced dysbiosis plays a critical role in MDSC induction. Interestingly, treatment with TCDD led to induction of MDSCs in the colon and undetectable levels of cysteine. MDSCs suppressed T cell proliferation while reconstitution with cysteine restored this response. Lastly, blocking CXC chemokine receptor 2 (CXCR2) impeded TCDD-mediated MDSC induction. Our data demonstrate that AhR activation by TCDD triggers dysbiosis which, in turn, regulates, at least in part, induction of MDSCs.