TGFβ1 has been implicated in cell cycle control and carcinogenesis. To address the exact function of TGFβ1 in skin carcinogenesis in vivo, mice with TGFβ1 expression targeted to keratinocytes were subjected to long-term chemical carcinogenesis treatment. TGFβ1 showed biphasic action during multistage skin carcinogenesis, acting early as a tumor suppressor but later enhancing the malignant phenotype. The transgenics were more resistant to induction of benign skin tumors than controls, but the malignant conversion rate was vastly increased. There was also a higher incidence of spindle cell carcinomas, which expressed high levels of endogenous TGFβ3, suggesting that TGFβ1 elicits an epithelial–mesenchymal transition in vivo and that TGFβ3 might be involved in maintenance of the spindle cell phenotype. The action of TGFβ1 in enhancing malignant progression may mimic its proposed function in modulating epithelial cell plasticity during embryonic development.