Microenvironmental factors contribute to the immune dysfunction characterizing acute myeloid leukemia (AML). Indoleamine 2,3-dioxygenase 1 (IDO1) is an interferon (IFN)-γ-inducible enzyme that degrades tryptophan into kynurenine, which, in turn, inhibits effector T cells and promotes regulatory T-cell (Treg) differentiation. It is presently unknown whether childhood AML cells express IDO1 and whether IDO1 activity correlates with patient outcome. We investigated IDO1 expression and function in 37 children with newly diagnosed AML other than acute promyelocytic leukemia. Blast cells were cultured with exogenous IFN-γ for 24 hours, followed by the measurement of kynurenine production and tryptophan consumption. No constitutive expression of IDO1 protein was detected in blast cells from the 37 AML samples herein tested. Conversely, 19 out of 37 (51%) AML samples up-regulated functional IDO1 protein in response to IFN-γ. The inability to express IDO1 by the remaining 18 AML samples was not apparently due to a defective IFN-γ signaling circuitry, as suggested by the measurement of signal transducer and activator of transcription 3 (STAT3) phosphorylation. Co-immunoprecipitation assays indicated the occurrence of physical interactions between STAT3 and IDO1 in AML blasts. In line with this finding, STAT3 inhibitors abrogated IDO1 function in AML blasts. Interestingly, levels of IFN-γ were significantly higher in the bone marrow fluid of IDO-expressing compared with IDO-nonexpressing AMLs. In mixed tumor lymphocyte cultures (MTLC), IDO-expressing AML blasts blunted the ability of allogeneic naïve T cells to produce IFN-γ and promoted Treg differentiation. From a clinical perspective, the 8-year event-free survival was significantly worse in IDO-expressing children (16.4%, SE 9.8) as compared with IDO-nonexpressing ones (48.0%, SE 12.1; p=0.035). These data indicate that IDO1 expression by leukemia blasts negatively affects the prognosis of childhood AML. Moreover, they speak in favor of the hypothesis that IDO can be targeted, in adjunct to current chemotherapy approaches, to improve the clinical outcome of children with AML.