Decorin is a member of the small leucine-rich proteoglycan (SLRP) gene family that has recently become a focus in various areas of cancer research. The decorin protein consists of a core protein and a covalently linked glycosaminoglycan chain. Decorin binds to collagens type I, II and IV in vivo and promotes the formation of fibers with increased stability and changes in solubility. Further, the decorin core protein binds to growth factors, including transforming growth factor-beta (TGF-beta), to other intercellular matrix molecules such as fibronectin and thrombospondin, and to the decorin endocytosis receptor. Decorin may directly interfere with the cell cycle via the induction of p21WAF1/CIP1 (p21), a potent inhibitor of cyclin-dependent kinases (CDKs). Here, we discuss interactions of decorin with TGF-beta and with p21, both of which are relevant to carcinogenesis and tumor progression. TGF-beta is released by tumors of various histogenetic origins and promotes immunosuppression in the host and tumor immune escape by induction of growth arrest and apoptosis in immune cells, by downregulation of MHC II antigen expression and by changes in the cytokine release profiles of immune and tumor cells. Moreover, TGF-beta may modulate tumor growth in an autocrine and paracrine fashion, may mediate drug resistance, and may facilitate tumor angiogenesis. Decorin binds to TGF-beta, thus inhibiting its bioactivity, and is a direct or indirect negative modulator of TGF-beta synthesis. Ectopic expression of decorin results in the regression of rat C6 gliomas, an antineoplastic effect attributed to the reversal of TGF-beta-induced immunosuppression. On the other hand, de novo expression of decorin in colon cancer cells and some other tumor cells, even though not in glioma cells, results in an upregulation of p21 expression and a cell cycle arrest, presumably in a TGF-beta-independent manner. Decorin expression is downregulated in many tumors but upregulated in the peritumoral stroma. By virtue of its growth regulatory and immunomodulatory properties, decorin promises to become a novel target for the experimental therapy of human cancers.