Alterations of TGF-β signaling have been described in colorectal cancer, although the molecular consequences are largely unknown. By using transgenic mice overexpressing TGF-β or a dominant-negative TGF-βRII, we demonstrate that TGF-β signaling in tumor infiltrating T lymphocytes controls the growth of dysplastic epithelial cells in experimental colorectal cancer, as determined by histology and a novel system for high-resolution chromoendoscopy. At the molecular level, TGF-β signaling in T cells regulated STAT-3 activation in tumor cells via IL-6. IL-6 signaling required tumor cell-derived soluble IL-6R rather than membrane bound IL-6R and suppression of such TGF-β-dependent IL-6 trans-signaling prevented tumor progression in vivo. Taken together, our data provide novel insights into TGF-β signaling in colorectal cancer and suggest novel therapeutic approaches for colorectal cancer based on inhibition of TGF-β-dependent IL-6 trans-signaling.