Transforming growth factor-beta (TGF-beta) is a potent regulatory cytokine with diverse effects on hemopoietic cells. The pivotal function of TGF-beta in the immune system is to maintain tolerance via the regulation of lymphocyte proliferation, differentiation, and survival. In addition, TGF-beta controls the initiation and resolution of inflammatory responses through the regulation of chemotaxis, activation, and survival of lymphocytes, natural killer cells, dendritic cells, macrophages, mast cells, and granulocytes. The regulatory activity of TGF-beta is modulated by the cell differentiation state and by the presence of inflammatory cytokines and costimulatory molecules. Collectively, TGF-beta inhibits the development of immunopathology to self or nonharmful antigens without compromising immune responses to pathogens. This review highlights the findings that have advanced our understanding of TGF-beta in the immune system and in disease.