Transforming growth factor-beta (TGF-beta), a product of neoplastic and hemopoietic cells, is a bifunctional regulator of the immune response. At femtomolar concentrations, TGF-beta stimulates monocyte migration, and picomolar quantities induce synthesis of monocyte growth factors, including IL-1, that may promote tissue repair by regulating fibrosis and angiogenesis. Paradoxically, TGF-beta at picomolar concentrations also blocks the ability of IL-1 to stimulate lymphocyte proliferation. At 0.01 to 1.0 ng/ml, TGF-beta 1 and its homologue, TGF-beta 2, suppress the IL-1-dependent murine thymocyte proliferation assay. TGF-beta also inhibits human peripheral blood T lymphocyte mitogenesis. Inhibition of cell division appears to occur after activation of the lymphocytes inasmuch as neither gene expression nor translation of IL-2R is suppressed. Furthermore, TGF-beta does not block synthesis of IL-2. Therefore, TGF-beta 1 and TGF-beta 2 likely act at a site distal to IL-1 to block lymphocyte DNA synthesis. These findings suggest that TGF-beta secreted in an inflammatory site may be beneficial in diminishing lymphocyte function while promoting fibrosis and tissue repair. However, TGF-beta generated by neoplastic tissues may provide a mechanism for unrestricted tumor cell growth through its selective immunosuppressive effects.