The increasing use of complementary and alternative medicine (CAM) has kindled the need for scientific evaluation of the mechanism of action of CAMs. Although, licorice, a common ingredient in many Traditional Chinese medicine (TCM) has attracted great attention for its antitumor and immunomodulatory activities, the mechanism of action of its polysaccharides is still unclear. Here we report the immunomodulatory activity of licorice polysaccharides in vivo. The differential anticancer activities of licorice polysaccharides by tumorigenesis and immunomodulation was evaluated in vivo. Six weeks old, 120 CT-26 tumor bearing BALB/c mice, weighing 20 ± 2 g were used. They were randomly divided into six groups, three groups receiving high molecular weight (fraction A), low molecular weight (fraction B) polysaccharides and crude extract (fraction C); positive, negative and normal groups receiving cytoxin, saline and normal diet respectively. Weight of mice and tumors was determined and tumorigenicity assay calculated to determine the anticancer effects. Immunomodulatory potential was determined by immune organ indices, immune cell population and serum cytokine levels using immune organ weight and index, flow cytometry and cytokine/chemokine bead panel kit respectively. Licorice polysaccharides exhibited immunomodulatory activities in CT 26 tumor bearing BALB/c mice. The polysaccharides significantly suppressed tumor growth and increased immune organ index. Furthermore, the immunomodulatory effect was evident with activation of CD4+ and CD8+ immune cells population. The polysaccharides also affected the production of various cytokines, by increasing IL 2, IL 6, IL 7 levels and a decreasing TNFα levels. In summary, licorice polysaccharide especially of low molecular weight exhibit anticancer and immunomodulatory activities by suppressing tumor growth and improving general health of mice. They also augment the thymus/spleen index and population of T lymphocytes. Furthermore, the polysaccharides enhance the levels of serum antitumor cytokines, IL 2, IL 6 and IL 7 while decreasing pro-tumor cytokine TNFα.