Despite advances in identifying the key immunoregulatory roles of the human leukocyte immunoglobulin (Ig)-like receptor (LILR) family members, the function of the inhibitory receptor LILRB3 (ILT5, CD85a, LIR3) remains unclear. Studies indicate a predominant myeloid expression; however, high homology within the LILR family and a relative paucity of reagents have hindered progress. To investigate its function and potential immunomodulatory capacity, a panel of LILRB3-specific monoclonal antibodies (mAb) was generated. LILBR3-specific mAb bound to discrete epitopes in either Ig-like domain two or four. LILRB3 ligation on primary human monocytes by agonistic mAb resulted in phenotypic and functional changes, leading to potent inhibition of immune responses in vitro, including significant reduction in T cell proliferation. Importantly, agonizing LILRB3 in humanized mice induced tolerance and permitted efficient engraftment of allogeneic cells. Our findings reveal powerful immunoregulatory functions of LILRB3 and identify it as an important myeloid immune checkpoint receptor.