The partially purified water extract from Euglena gracilis (EWE) was evaluated for its antitumor and immunomodulatory effects in cell cultures and in a mouse orthotopic lung carcinoma allograft model. In two-dimensional cell culture, the EWE treatment inhibited cell growth of both murine Lewis lung carcinoma (LLC) and human lung carcinoma cells (A549 and H1299) in a dose- and time-dependent manner. In contrast, the growth of mouse bone marrow cells (BMCs), but not mouse splenocytes (SPLs), was stimulated by the treatment with EWE. In three-dimensional spheroid culture, spheroid growth of LLC cells was significantly attenuated by EWE treatment. In a mouse LLC orthotopic allograft model, pretreatment with EWE (150–200 mg/kg/day, via drinking water) three weeks prior to the LLC cell inoculation, but not post-treatment after LLC cell inoculation, significantly attenuated the growth of LLC tumors in immunocompetent syngeneic mouse lung. This tumor growth attenuation coincided with a significant decrease in the population of myeloid-derived cells, primarily neutrophils. Flow cytometric analysis revealed that the EWE treatment significantly attenuated growth of granulocytic myeloid-derived suppressor cells (gMDSC) in BMCs and that this decrease was due to induction of gMDSC-specific apoptosis and differentiation of monocytic MDSCs (mMDSC) to macrophages. The present study provides evidence that EWE pretreatment inhibits lung carcinoma growth mainly by stimulating host antitumor immunity through attenuation of growth of gMDSCs and decreasing the number of peripheral granulocytes. This study suggests that the partially purified extract derived from Euglena gracilis contains significant bioactive materials that prevent lung carcinoma growth.