We examined the localization of transforming growth factor (TGF)-beta in first-trimester and term human decidua and chorionic villi and explored the role of this factor on the proliferation and differentiation of cultured trophoblast cells. Two antibodies, 1D11.16.8, a mouse monoclonal neutralizing antibody capable of recognizing both TGF-beta 1 and TGF-beta 2 and CL-B1/29, a rabbit polyclonal antibody capable of recognizing TGF-beta 2, were used to immunolocalize TGF-beta in fixed, paraffin-embedded, or fixed, frozen sections of placenta and decidua, providing similar results. Intense labeling was observed in the extracellular matrix (ECM) of the first-trimester decidua and cytoplasm of term decidual cells. Syncytiotrophoblast cell cytoplasm as well as the ECM in the core of the chorionic villi of both first-trimester and term placentas exhibited a moderate degree of labeling. Strong cytoplasmic labeling was observed in the cytotrophoblastic shell of the term placenta. To examine the role of TGF-beta on trophoblast proliferation and differentiation, early passage cultures of first-trimester and primary cultures of term trophoblast cells were established and characterized on the basis of numerous immunocytochemical and functional markers. These cells expressed cytokeratin, placental alkaline phosphatase, urokinase-type plasminogen activator, and pregnancy-specific beta glycoprotein, but not factor VIII or 63D3; they also produced hCG and collagenase type IV. Exposure of first-trimester trophoblast cultures to TGF-beta 1 significantly inhibited proliferation in a dose-dependent manner. An antiproliferative effect was also noted in the presence of TGF-beta 2. These effects were abrogated in the presence of the neutralizing anti-TGF-beta antibody (1D11.16.8) in a concentration-dependent manner. In a 3-day culture, exogenous TGF-beta 1 stimulated formation of multinucleated cells by the first trimester as well as term trophoblast cells. Addition of neutralizing anti-TGF-beta antibody to first-trimester trophoblast cells stimulated proliferation beyond control levels in a 24-h culture and reduced formation of multinucleated cells in a 3-day culture, indicating the presence of endogenous TGF-beta activity. These results indicate that TGF-beta produced at the human fetal-maternal interface plays a major regulatory role in the proliferation and differentiation of the trophoblast.