Aging is the single biggest risk factor for malignant transformation. Among the most common age-associated malignancies are non-melanoma skin cancers, comprising the most common types of human cancer. Here we show that mutant H-Ras activation in mouse epidermis, a frequent event in cutaneous squamous cell carcinoma (SCC), elicits a differential outcome in aged versus young mice. Whereas H-Ras activation in the young skin results in hyperplasia that is mainly accompanied by rapid hair growth, H-Ras activation in the aged skin results in more dysplasia and gradual progression to in situ SCC. Progression is associated with increased inflammation, pronounced accumulation of immune cells including T cells, macrophages and mast cells as well as excessive cell senescence. We found not only an age-dependent increase in expression of several pro-inflammatory mediators, but also activation of a strong anti-inflammatory response involving enhanced IL4/IL10 expression and immune skewing toward a Th2 response. In addition, we observed an age-dependent increase in the expression of Pdl1, encoding an immune suppressive ligand that promotes cancer immune evasion. Moreover, upon switching off oncogenic H-Ras activity, young but not aged skin regenerates successfully, suggesting a failure of the aged epidermal stem cells to repair damaged tissue. Our findings support an age-dependent link between accumulation of senescent cells, immune infiltration and cancer progression, which may contribute to the increased cancer risk associated with old age.