Immune paresis in patients with acute-on-chronic liver failure (ACLF) accounts for infection susceptibility and increased mortality. Immunosuppressive mononuclear CD14 HLA-DR myeloid-derived suppressor cells (M-MDSCs) have recently been identified to quell antimicrobial responses in immune-mediated diseases. We sought to delineate the function and derivation of M-MDSC in patients with ACLF, and explore potential targets to augment antimicrobial responses. Patients with ACLF (n=41) were compared with healthy subjects (n=25) and patients with cirrhosis (n=22) or acute liver failure (n=30). CD14 CD15 CD11b HLA-DR cells were identified as per definition of M-MDSC and detailed immunophenotypic analyses were performed. Suppression of T cell activation was assessed by mixed lymphocyte reaction. Assessment of innate immune function included cytokine expression in response to Toll-like receptor (TLR-2, TLR-4 and TLR-9) stimulation and phagocytosis assays using flow cytometry and live cell imaging-based techniques. Circulating CD14 CD15 CD11b HLA-DR M-MDSCs were markedly expanded in patients with ACLF (55% of CD14+ cells). M-MDSC displayed immunosuppressive properties, significantly decreasing T cell proliferation (p=0.01), producing less tumour necrosis factor-alpha/interleukin-6 in response to TLR stimulation (all p<0.01), and reduced bacterial uptake of (p<0.001). Persistently low expression of HLA-DR during disease evolution was linked to secondary infection and 28-day mortality. Recurrent TLR-2 and TLR-4 stimulation expanded M-MDSC in vitro. By contrast, TLR-3 agonism reconstituted HLA-DR expression and innate immune function ex vivo. Immunosuppressive CD14 HLA-DR M-MDSCs are expanded in patients with ACLF. They were depicted by suppressing T cell function, attenuated antimicrobial innate immune responses, linked to secondary infection, disease severity and prognosis. TLR-3 agonism reversed M-MDSC expansion and innate immune function and merits further evaluation as potential immunotherapeutic agent.