Although alterations in CD3‐associated signal‐transducing molecules in tumor‐infiltrating T cells of patients with advanced cancer have been previously described, the mechanism behind these changes is not known. We demonstrate that macrophages isolated from metastatic lymph nodes of patients with malignant melanoma down‐regulate levels of CD3ζ in autologous peripheral blood T cells. Lipopolysaccharide (LPS)‐ or phorbol 12‐myristate 13‐acetate (PMA)‐stimulated monocytes derived from peripheral blood of healthy donors also induced decreased expression of CD3 and CD16‐associated ζ chains similar to that observed in T cells and natural killer (NK) cells of patients with advanced cancer. Co‐culture with activated monocytes impaired Ca²⁺ mobilization in peripheral blood derived‐T cells when stimulated with monoclonal antibodies to CD3 and also strongly inhibited melanoma‐specific cytotoxic T lymphocyte (CTL) activity and NK activity. The presence of catalase, a scavenger of H₂O₂, during co‐culture almost totally abrogated the inhibitory effect of activated monocytes on melanoma‐specific CTL lines and on NK cells. Pre‐treatment of CTL or NK cells with nontoxic concentrations (1 × 10⁻⁵ M) of H₂O₂ also severely reduced their cytotoxic activity which could be prevented by catalase. The decrease in CD3ζ and in CD16ζ expression, induced by macrophages isolated from metastatic lymph nodes or by LPS‐stimulated monocytes, was also prevented by catalase when maintained throughout the co‐culture period. The possibility that monocyte/macrophage‐derived reactive oxygen metabolites contribute directly to alterations in signal transducing molecules of T cells and NK cells and to the mechanism of immunosuppression in individuals with cancer should be considered.