Mice deficient in the E3 ubiquitin ligase Cbl-b have CD28-independent T cells and develop autoimmunity. We previously reported that Cbl-b−/− CD4+ CD25− T effector cells are resistant in vitro to the antiproliferative effects of CD4+ CD25+ regulatory T cells and TGF-β. We have now asked whether the resistance noted in Cbl-b−/− T cells is restricted solely to TGF-β’s antiproliferative effects, whether the TGF-β resistance has in vivo relevance, and whether a defect can be identified in the TGF-β signaling pathway. We now demonstrate the following: 1) in vitro, Cbl-b deficiency prevents the TGF-β-mediated induction of Foxp3+ functional regulatory T cells; 2) in vivo, Cbl-b−/− mice show a significantly enhanced response to a tumor that is strictly TGF-β regulated; and 3) Cbl-b−/− T effector cells have defective TGF-β-mediated Smad2 phosphorylation. These studies are the first to document that the E3 ubiquitin ligase Cbl-b plays an integral role in T cell TGF-β signaling, and that its absence results in multifunctional TGF-β-related defects that have important disease-related implications.