The type III interferon family (IFN-III), including IFN-λ3 (IL-28B), has antiviral, anti-tumor, and immunomodulatory activities. Although IL-28B anti-tumor effect has been extensively explored, its underlying anti-tumor mechanism remains unclear. Here, we explored IL-28B effects on colon cancer. We found that IL-28B significantly inhibited colon cancer growth in a murine MC38 tumor cell engraftment model. Interestingly, IL-28B did not directly promote apoptosis or inhibit MC38 tumor cell proliferation in vitro. IL-28B treatment exerted indirect anti-tumor activity by downregulating M2 macrophages in the tumor microenvironment. Furthermore, IL-28B inhibited M2 macrophage polarization in vitro. It also halted M2 macrophage differentiation predominantly via inhibition of the STAT3 and JNK signaling pathways. Our findings revealed that IL-28B inhibited M2 macrophages in the tumor microenvironment to delay colon cancer progression. Our study provides new evidence of IL-28B anti-tumor and immunomodulatory activities.