In previous studies we reported that plasmacytoid dendritic cells (PDC) infiltrating head and neck cancer tissue are functionally impaired, but the molecular basis for the functional deficiency remained unclear. Here we demonstrate that tumour-derived prostaglandin E2 (PGE(2)) and transforming growth factor-beta (TGF-beta) increase interleukin-8 (IL-8) but synergistically inhibit interferon-alpha (IFN-alpha) and tumour necrosis factor (TNF) production of Toll-like receptor 7 (TLR7)- and Toll-like receptor 9 (TLR9)-stimulated PDC. The inhibitory effect of PGE(2) could be mimicked by the induction of cyclic AMP (cAMP) and by inhibitors of cyclooxygenase. The contribution of tumour-derived TGF-beta was confirmed by the TGF-beta antagonist SB-431542. Suppression of tumour-derived PGE(2) and TGF-beta restored TLR-induced IFN-alpha production of PDC. Additionally, PGE(2)- and TGF-beta-treated PDC display a 'tolerogenic' phenotype because of a downregulation of CD40 accompanied by an upregulation of CD86. Finally, in TLR-stimulated PDC, PGE(2) and TGF-beta reduce the CCR7:CXCR4 ratio, suggesting that PDC are impaired in their ability to migrate to tumour-draining lymph nodes but are retained in stromal cell-derived factor 1 (SDF-1)-expressing tissues. Based on these data, cyclooxygenase inhibitors and TGF-beta antagonists may improve TLR7- and TLR9-based tumour immunotherapy.