Chronic inflammation is an important contributor to the development of lung cancers, one of the most common malignancies worldwide, but the underlying molecular mechanisms of inflammation that specifically cue cancer risk remain poorly understood. Apoptosis inhibitor 6 (Api6, also known as AIM, Sp-α, and CD5L) is a downstream target gene of neutral lipids and peroxisome proliferator-activated receptor gamma in lung alveolar type II (AT II) epithelial cells. An association among increased expression of Api6 in certain settings of pathogenic lung inflammation in mice prompted us to hypothesize a possible role in cancer. Here, we report that Api6 promotes malignant transformation by limiting lung epithelial cell apoptosis and promoting immune escape. The specific function of Api6 in AT II cells was determined by using a doxycycline-inducible Api6 mouse model. Api6 overexpression inhibited apoptosis and activated oncogenic signaling in AT II lung epithelial cells, inducing emphysema and adenocarcinoma. In addition, Api6 overexpression in AT II cells increased the concentrations of proinflammatory cytokines/chemokines in bronchoalveolar lavage fluid and serum, promoting expansion of myeloid-derived suppressor cells (MDSC) in lung and blood but not in bone marrow or spleen. Lung MDSCs suppressed T-cell proliferation and activity in vitro and reduced levels of T cells in vivo following doxycycline treatment to activate Api6. Together, our findings establish that Api6 promotes lung tumorigenesis by blocking a mechanism of epithelial apoptosis that would normally support immunosurveillance.