The transforming growth factor-beta (TGF beta) polypeptides control a variety of cellular processes including organogenesis and cellular proliferation and differentiation. In the developing lung, TGF beta(1) treatment inhibits airway branching and expression of the genes for surfactant proteins (SP). Many effects of TGF beta are mediated at the level of gene transcription but there is limited information regarding signaling pathways and target transcription factors. In this study with human pulmonary adenocarcinoma H441 cells, we investigated TGF beta(1) effects on SP-B, a protein which is essential for normal function of pulmonary surfactant. TGF beta(1) (10 ng/ml) reduced SP-B mRNA content in a time-dependent fashion, and transient transfection studies localized responsiveness to the region of the SP-B promoter (-112/-72 bp) containing binding sites for thyroid transcription factor-1 (TTF-1) and hepatocyte nuclear factor 3 (HNF3), transcription factors that are important enhancers of SP gene expression. Using electrophoretic mobility shift assay and immunofluorescence, we demonstrated rapid accumulation of these transcription factors in the cytoplasm and subsequent loss from the nucleus on TGF beta(1) treatment of both adenocarcinoma cells and cultured human fetal lung. TGF beta(1) treatment caused intracellular translocation of protein kinase C and effects of TGF beta(1) were mostly abrogated in the presence of the protein kinase inhibitor calphostin C. We conclude that TGF beta(1), acting via protein phosphorylation, blocks nuclear translocation of TTF-1 and HNF3 which results in down-regulation of the SP-B gene and presumably other pulmonary genes which are transactivated by these factors.