Immunosuppressive myeloid cells in the tumor microenvironment play a major role in suppressing tumor immunity via the production of arginase, IL-10, and others. The objectives of this study were to determine the ability of all-trans retinoic acid (ATRA) to decrease the expression of arginase and other soluble mediators by canine monocyte-derived macrophages (MDMs) and to determine the inhibitory activity of arginase on canine T-lymphocytes. The immunomodulatory ability of ATRA (2 µM) on canine MDMs was evaluated via reverse transcription quantitative PCR (RT-qPCR), flow cytometry, arginase activity assay, and enzyme-linked immunoassay (ELISA). Arginase effects on T-lymphocyte phenotype and proliferation were then evaluated by flow cytometry. ATRA consistently decreased MDM expression of IL6, TGFB1, NOS2, ARG1, and CIITA transcripts, by approximately 2–4-fold, although this did not reach statistical significance for ARG1 or CIITA. Furthermore, arginase activity was decreased in ATRA-treated MDMs while the MDM phenotype remained unchanged. Arginase decreased the expression of granzyme B on CD8+ T-lymphocytes and inhibited CD4+ and CD8+ T-lymphocyte proliferation. These findings suggested that ATRA could inhibit canine MDM production of soluble inflammatory/immunosuppressive mediators. These data also revealed that arginase decreased canine T-lymphocyte proliferation and granzyme B expression. Further studies are needed to determine whether ATRA could reverse the immunosuppressive effects of myeloid cells on canine T-lymphocytes in vivo.