Tacrolimus (also known as FK506) is one of the most widely used immunosuppressive drugs in the postsurgery management of transplantation. To date, the cellular mechanism by which FK506 suppresses immune activation and elongates allograft survival remains largely unclear. Here, we employed a mouse model for corneal penetrating keratoplasty to interrogate this critical question. Administration of FK506 led to increased expansion myeloid-derived suppressor cells (MDSC) in recipient mice and prolonged survival of corneal allografts. In contrast, antibody-mediated depletion of MDSC abolished the FK506-mediated beneficial effects, which are associated with increased dendritic cell (DC) activation and recruitment to the graft bed and allografts. Of note, unlike continuous depletion and temporary early depletion (in the first week), delayed depletion of MDSC that started on day 8 posttransplant failed to disrupt the FK506-induced elongation of corneal allograft survival. Single-cell RNA sequencing analysis and immunofluorescence staining of corneal grafts reveal that FK506 reduced graft infiltration of immune cells, including DC and T cells, in an MDSC-dependent and temporal fashion. Moreover, depletion of MDSC reverted the FK506's suppression of DC maturation in the draining lymph node on day 7. Taken together, these findings indicate that FK506 prolongs allograft survival through induction of MDSC-mediated suppression of early DC activation.