Signaling through the transforming growth factor-beta (TGF-beta) pathway results in growth inhibition and induction of apoptosis in various cell types. We show that this pathway is blocked in Kaposi sarcoma herpesvirus (KSHV)-infected primary effusion lymphoma through down-regulation of the TGF-beta type II receptor (TbetaRII) by epigenetic mechanisms. Our data also suggest that KSHV infection may result in lower expression of TbetaRII in Kaposi sarcoma and multicentric Castleman disease. KSHV-encoded LANA associates with the promoter of TbetaRII and leads to its methylation and to the deacetylation of proximal histones. Reestablishment of signaling through this pathway reduces viability of these cells, inferring that KSHV-mediated blockage of TGF-beta signaling plays a role in the establishment and progression of KSHV-associated neoplasia. These data suggest a mechanism whereby KSHV evades both the antiproliferative effects of TGF-beta signaling by silencing TbetaRII gene expression and immune recognition by suppressing TGF-beta-responsive immune cells through the elevated secretion of TGF-beta1.