We investigated the role of transforming growth factor-beta 1 (TGF-beta) in regulation of T cell growth and differentiation. Treatment of CTLL-2 cells with TGF-beta inhibited IL-2-dependent proliferation and caused morphologic changes as well as increased adherence. A major change of phenotype in TGF-beta-treated cells was the de novo expression of CD8 alpha chain in 35% of cells, which required the continuous presence of TGF-beta. Of the CD8 alpha+ cells, 20 to 30% co-expressed CD8 beta chain. Increased CD8 expression occurred even in the total absence of cell growth, was not a consequence of growth inhibition, and was not a result of selective growth or survival of CD8+ cells. New RNA synthesis was required for TGF beta-induced CD8 alpha surface expression, inasmuch as this was prevented by treatment with actinomycin D. Northern blot analysis demonstrated that cells treated with IL-2 + TGF-beta rapidly accumulated mRNA encoding both chains of the CD8 dimer, to a level fourfold greater than control by 6 to 12 h. In contrast, the IL-2-dependent increases in IL-2R alpha, IL-2R beta, and Granzyme B mRNA levels in these cultures were profoundly inhibited by TGF-beta. When unfractionated murine thymocytes were stimulated with phorbol dibutyrate plus ionomycin and cultured with IL-2 + TGF-beta, an increase in CD8 alpha mRNA was seen and greater numbers of CD8+ cells with higher levels of CD8 alpha and CD8 beta surface expression resulted, as compared to controls treated with IL-2 alone. Furthermore, similar treatment of CD4-CD8-(double negative) thymocytes with TGF-beta induced de novo CD8 alpha expression by a substantial number of cells, and the majority of these CD8+ cells lacked TCR/CD3. These data suggest that TGF-beta has both positive and negative regulatory effects on the expression of gene products important for T lymphocyte differentiation and function.