We have recently reported that some cancers induce accumulation of bone marrow (BM) B-cell precursors in the spleen to convert them into metastasis-promoting, immunosuppressive B cells. Here, using various murine tumor models and samples from humans with breast and ovarian cancers, we provide evidence that cancers also co-opt differentiation of these B-cell precursors to generate macrophage-like cells (termed B-MF). We link the transdifferentiation to a small subset of CSF1R+ Pax5Low cells within BM pre-B and immature B cells responding to cancer-secreted M-CSF with downregulation of the transcription factor Pax5 via CSF1R signaling. Although the primary source of tumor-associated macrophages is monocytes, B-MFs are phenotypically and functionally distinguishable. Compared to monocyte-derived macrophages, B-MFs more efficiently phagocytize apoptotic cells, suppress proliferation of T cells and induce FoxP3+ regulatory T cells. In mouse tumor models, B-MFs promote shrinkage of the tumor-infiltrating IFNγ+ CD4 T cell pool and increase cancer progression and metastasis, suggesting that this cancer-induced transdifferentiation pathway is functionally relevant and hence could serve as an immunotherapeutic target.