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Chronic lymphocytic leukemia (CLL) cells possess regulatory functions comparable to those of normal B10 cells, a regulatory B cell subset that suppresses effector T-cell function through STAT3-mediated IL-10 production. However, the mechanisms governing IL-10 production by CLL cells are not fully understood. Here, we show that the CXC chemokine ligand 12 (CXCL12)–CXCR4–STAT3 axis regulates IL-10 production by CLL cells and their ability to suppress T-cell effector function through an IL-10 mediated mechanism. Knockdown of STAT3 significantly impaired the ability of CLL cells to produce IL-10. Furthermore, experiments to assess the role of lenalidomide, an immunomodulatory agent with direct antitumor effect as well as pleiotropic activity on the immune system, showed that this agent prevents a CXCL12-induced increase in p-S727-STAT3 and the IL-10 response by CLL cells. Lenalidomide also suppressed IL-10-induced Y705-STAT3 phosphorylation in healthy T cells, thus reversing CLL-induced T-cell dysfunction. We conclude that the capacity of CLL cells to produce IL-10 is mediated by the CXCL12–CXCR4–STAT3 pathway and likely contributes to immunodeficiency in patients. Lenalidomide appears to be able to reverse CLL-induced immunosuppression through including abrogation of the CXCL12–CXCR4–S727–STAT3-mediated IL-10 response by CLL cells and prevention of IL-10-induced phosphorylation of Y705-STAT3 in T cells.