The transient tumor-like attributes of the first-trimester placenta anchor the developing embryo to the uterine wall thus establishing a vital link between the mother and the fetus. Dysregulation of this invasive behavior and/or controlled proliferation of the placenta is associated with abnormal pregnancies. Several of these diseased states also exhibit aberrant telomerase activity, among other pathophysiological manifestations. Considering the strong correlation between telomerase activity and tumorigenesis, it was of interest to see whether the crucial processes of trophoblast proliferation and differentiation were brought about through the modulation of telomerase. Using two in vitro model systems of trophoblast differentiation, we demonstrate here that telomerase activity is negatively regulated during placental differentiation. We further show that this modulation is at the level of transcription of hTERT. We also propose a role for TGF beta1 in regulating telomerase activity in differentiating trophoblasts by down-regulating the expression of hTERT at the transcriptional level.