Transforming growth factor beta1 (TGF-beta1) regulates both cell growth and cellular plasticity and is therefore important in the molecular control of both the developmental and neoplastic processes. It has been suggested that TGF-beta1 may be a positive or negative regulator of tumorigenesis. Stimulation of tumorigenesis could be due to its action as an immunosuppressor or as an inducer of angiogenesis, or by its direct action on the cell in promoting cellular plasticity. In the current study, we provide evidence that TGF-beta1 can act directly on keratinocytes in vivo to induce the reversible epithelial-mesenchymal conversion of a malignant metastatic keratinocyte cell line. Two squamous clones from the cell line were shown to undergo a reversible conversion to a fibroblastoid phenotype after culture in 1 ng/ml TGF-beta1. The morphological conversion became apparent at 24 h post-TGF-beta treatment and was complete after another 24 h. The conversion was characterized by a rapid delocalization of E-cadherin within 6-12 h posttreatment, followed by down-regulation of E-cadherin levels by 72 h. These squamous clones spontaneously converted to a fibroblastoid phenotype after sc injection in nude mice. Importantly, four of four clones that had been stably transfected with a dominant negative TGF-beta type II receptor were unable to undergo this mesenchymal switch in vivo, despite the fact that all clones stably transfected with neomyocin resistance alone retained their spindle characteristics in vivo. This demonstrates that the epithelial-mesenchymal conversion event is mediated directly via the TGF-beta signaling pathway of the tumor cell per se, and that it is sufficient to significantly enhance tumorigenicity and the malignant and invasive characteristics of the tumor in vivo.