Pancreatic cancer (PC) mobilizes myeloid cells from the bone marrow to the tumor where they promote tumor growth and proliferation. Cancer stem cells (CSCs) are a population of tumor cells that are responsible for tumor initiation. Aldehyde dehydrogenase-1 activity in PC identifies CSCs, and its activity has been correlated with poor overall prognosis in human PC. Myeloid cells have been shown to impact tumor stemness, but the impact of immunosuppressive tumor-infiltrating granulocytic and monocytic myeloid-derived suppressor cells (Mo-MDSC) on ALDH1^Bright CSCs and epithelial to mesenchymal transition is not well understood. In this study, we demonstrate that Mo-MDSC (CD11b⁺/Gr1⁺/Ly6G⁻/Ly6C^hi) significantly increase the frequency of ALDH1^Bright CSCs in a mouse model of PC. Additionally, there was significant upregulation of genes associated with epithelial to mesenchymal transition. We also found that human PC converts CD14⁺ peripheral blood monocytes into Mo-MDSC (CD14⁺/HLA-DR^low/−) in vitro, and this transformation is dependent on the activation of the STAT3 pathway. In turn, these Mo-MDSC increase the frequency of ALDH1^Bright CSCs and promote mesenchymal features of tumor cells. Finally, blockade of STAT3 activation reversed the increase in ALDH1^Bright CSCs. These data suggest that the PC tumor microenvironment transforms monocytes to Mo-MDSC by STAT3 activation, and these cells increase the frequency of ALDH1^Bright CSCs. Therefore, targeting STAT3 activation may be an effective therapeutic strategy in targeting CSCs in PC.