CD4+ CD25+ T regulatory (T reg) cells were initially described for their ability to suppress autoimmune diseases in animal models. An emerging interest is the potential role of T reg cells in cancer development and progression because they have been shown to suppress antitumor immunity. In this study, CD4+ CD25− T cells cultured in conditioned medium (CM) derived from tumor cells, RENCA or TRAMP-C2, possess similar characteristics as those of naturally occurring T reg cells, including expression of Foxp3, a crucial transcription factor of T reg cells, production of low levels of IL-2, high levels of IL-10 and TGF-β, and the ability to suppress CD4+ CD25− T cell proliferation. Further investigation revealed a critical role of tumor-derived TGF-β in converting CD4+ CD25− T cells into T reg cells because a neutralizing Ab against TGF-β, 1D11, completely abrogated the induction of T reg cells. CM from a nontumorigenic cell line, NRP-152, or irradiated tumor cells did not convert CD4+ CD25− T cells to T reg cells because they produce low levels of TGF-β in CM. Finally, we observed a reduced tumor burden in animals receiving 1D11. The reduction in tumor burden correlated with a decrease in tumor-derived TGF-β. Treatment of 1D11 also reduced the conversion of CD4+ T cells into T reg cells and subsequent T reg cell-mediated suppression of antitumor immunity. In summary, we have demonstrated that tumor cells directly convert CD4+ CD25− T cells to T reg cells through production of high levels of TGF-β, suggesting a possible mechanism through which tumor cells evade the immune system.