Genetic inactivation of the transforming growth factor-beta (TGF-beta) signaling pathway can accelerate tumor progression in the mouse epidermal model of multistage carcinogenesis. By using an in vitro model of keratinocyte transformation that parallels in vivo malignant conversion to squamous cell carcinoma, we show that v-ras(Ha) transduced primary TGF-beta1-/- keratinocytes and keratinocytes expressing a TGF-beta type II dominant-negative receptor transgene have significantly higher frequencies of spontaneous transformation than control genotypes. Malignant transformation in the TGF-beta1-/- keratinocytes is preceded by aneuploidy and accumulation of chromosomal aberrations. Similarly, transient inactivation of TGF-beta signaling with a type II dominant-negative receptor adenovirus causes rapid changes in ploidy. Exogenous TGF-beta1 can suppress aneuploidy, chromosome breaks, and malignant transformation of the TGF-beta1-/- keratinocytes at concentrations that do not significantly arrest cell proliferation. These results point to genomic instability as a mechanism by which defects in TGF-beta signaling could accelerate tumor progression in mouse multistage carcinogenesis.