Transforming growth factor-β (TGF-β) plays an essential role in regulating the homeostasis of cells in the lymphoid lineage. TGF-β signaling is not required for normal thymopoiesis, but is essential for regulating the expansion, activation, and effector function of the mature CD4+ and CD8+ T cells in the peripheral lymphoid organs and target tissues. Recent studies in both mice and humans have elucidated an important and complex role for TGF-β in regulatory T-cell biology. Disruption of TGF-β signaling in T cells impairs the maintenance of regulatory T cells, results in the expansion of activated effector T cells, and is associated with the production of cytokines that have major effects on cells in their environment. While autoimmunity and inflammation are the principal phenotypes associated with the abrogation of TGF-β signaling in T cells in mice, emerging evidence now also directly links Smad-dependent TGF-β signaling in T cells to the suppression of epithelial neoplasia. The TGF-β receptor-activated Smad3 plays a critical role in mediating many of the inhibitory effects of TGF-β signaling in T cells, and has now been established as an important suppressor of leukemogenesis. These studies are increasing our awareness of the many complex mechanisms through which TGF-β signaling controls the pathogenesis of cancer.