Transforming growth factor β (TGF-β) is a pluripotent cytokine that controls key tumour suppressive functions^,,, but cancer cells are often unresponsive to it^,. The promyelocytic leukaemia (PML) tumour suppressor of acute promyelocytic leukaemia (APL) accumulates in the PML nuclear body, but cytoplasmic PML isoforms of unknown function have also been described^,. Here we show that cytoplasmic Pml is an essential modulator of TGF-β signalling. Pml-null primary cells are resistant to TGF-β-dependent growth arrest, induction of cellular senescence and apoptosis. These cells also have impaired phosphorylation and nuclear translocation of the TGF-β signalling proteins Smad2 and Smad3, as well as impaired induction of TGF-β target genes. Expression of cytoplasmic Pml is induced by TGF-β. Furthermore, cytoplasmic PML physically interacts with Smad2/3 and SARA (Smad anchor for receptor activation) and is required for association of Smad2/3 with SARA and for the accumulation of SARA and TGF-β receptor in the early endosome. The PML–RARα oncoprotein of APL can antagonize cytoplasmic PML function and APL cells have defects in TGF-β signalling similar to those observed in Pml-null cells. Our findings identify cytoplasmic PML as a critical TGF-β regulator, and further implicate deregulated TGF-β signalling in cancer pathogenesis.