Th17 cells and interleukin-17A (IL-17A) drive the pathogenesis of systemic lupus erythematosus (SLE) and lupus nephritis (LN). Although myeloid-derived suppressor cells (MDSCs) promote the differentiation of Th17 cells, the epigenetic mechanisms remain poorly characterized. Here, we determined that a long non-coding RNA, ALKBH3-AS1, contributes to MDSC-mediated Th17 cell differentiation. ALKBH3-AS1 expression was significantly suppressed in Th17 cells that were co-cultured with MDSCs (Th17 +MDSC vs. Th17 alone), but was rescued by inhibiting arginase with nor-NOHA (Th17 +MDSC+nor-NOHA vs. Th17 +MDSC). Clinically, the reduced level of ALKBH3-AS1 in the peripheral blood mononuclear cells (PBMCs) of SLE patients had negative correlations with disease severity and the percentage of Th17 cells. Overexpression of ALKBH3-AS1 or its murine ortholog (Alkbh3os1) inhibited TGF-β/SMAD signaling and blocked the differentiation of Th17 cells in vitro, and gene knockdown had the opposite effects. Mechanistically, ALKBH3-AS1 acts as a scaffold that recruits SMAD3 mRNA to the m6A reader YTHDF2, leading to increased SMAD3 decay. Therapeutically, Alkbh3os1 overexpression suppressed TGF-β/SMAD signaling, reduced Th17 cell differentiation, and ameliorated LN pathology in vivo. Collectively, these results showed that ALKBH3-AS1 is a pivotal epigenetic regulator of YTHDF2-mediated SMAD3 degradation in Th17 cell-driven autoimmunity, and suggest a novel target for treatment of SLE and LN.