In this study, we investigated whether activated T cells (ATC) armed with bispecific antibodies (aATC) can inhibits tumor growth and MDSC development in a Th1 cytokine-enriched (IL-2 and IFN-γ) microenvironment. Cytotoxicity mediated by aATC was significantly higher (P < 0.001) against breast cancer cell lines in the presence of Th1 cytokines as compared with control co-cultures. In the presence of aATC, CD33+ /CD11b+ /CD14- /HLA-DR- MDSC population was reduced significantly under both control (P < 0.03) and Th1-enriched (P < 0.036) culture conditions. Cytokine analysis in the culture supernatants showed high levels of MDSC suppressive chemokines CXCL9 and CXCL10 in Th1-enriched culture supernatants with highly significant increase (P < 0.001) in the presence of aATC. Interestingly, MDSC recovered from co-cultures without aATC showed potent ability to suppress activated T-cell-mediated cytotoxicity (P < 0.001), IFN-γ production (P < 0.01) and T-cell proliferation (P < 0.05) compared to those recovered from aATC-containing co-cultures. These data suggest that aATC can mediate enhanced killing of tumor cells and may suppress MDSC and T(reg) differentiation, and presence of Th() cytokines potentiates aATC-induced suppression of MDSC, suggesting that Th1-enriching immunotherapy may be beneficial in cancer treatment.