Transforming growth factor-beta (TGF-beta) is perhaps the most potent endogenous negative regulator of hematopoiesis. The intracellular signaling events mediating the effects of TGF-beta are multiple, involving extensive crosstalk between Smad-dependent and MAP-kinase-dependent pathways. We are only beginning to understand the importance of the balance between these cascades as a determinant of the response to TGF-beta, and have yet to determine the roles that disruption in TGF-beta signaling pathways might play in leukemogenesis. This review summarizes current knowledge regarding the function of TGF-beta in normal and malignant hematopoiesis. The principal observations made by gene targeting studies in mice are reviewed, with an emphasis on how a disruption of this pathway in vivo can affect blood cell development and immune homeostasis. We overview genetic alterations that lead to impaired TGF-beta signaling in hematopoietic neoplasms, including the suppression of Smad-dependent transcriptional responses by oncoproteins such as Tax and Evi-1, and fusion proteins such as AML1/ETO. We also consider mutations in genes encoding components of the core cell cycle machinery, such as p27(Kip1) and p15(INK4A), and emphasize their impact on the ability of TGF-beta to induce G1 arrest. The implications of these observations are discussed, and opinions regarding important directions for future research on TGF-beta in hematopoiesis are provided.