Rapamycin is an immunosuppressive drug that is widely used in the postsurgery management of transplantation. To date, the mechanism by which rapamycin reduces posttransplant neovascularization has not been fully understood. Given the original avascularity and immune privilege of the cornea, corneal transplantation is considered as an ideal model to investigate neovascularization and its effects on allograft rejection. Previously, we found that myeloid-derived suppressor cells (MDSC) prolong corneal allograft survival through suppression of angiogenesis and lymphangiogenesis. Here, we show that depletion of MDSC abolished rapamycin-mediated suppression of neovascularization and elongation of corneal allograft survival. RNA-sequencing analysis revealed that rapamycin dramatically enhanced the expression of arginase 1 (Arg1). Furthermore, an Arg1 inhibitor also completely abolished the rapamycin-mediated beneficial effects after corneal transplantation. Taken together, these findings indicate that MDSC and elevated Arg1 activity are essential for the immunosuppressive and antiangiogenic functions of rapamycin.