The role of Transforming growth factor beta (TGF-beta) in carcinogenesis is complex. There are reports on both tumor inhibition and tumor promotion by TGF-beta. To elucidate the complex role of TGF-beta in epithelial carcinogenesis, we generated transgenic mice overexpressing a dominant negative type II TGF-beta receptor in the basal cell compartment and in follicular cells of the skin. Despite the reduced responsiveness of transgenic keratinocytes to TGF-beta, both proliferation and differentiation were normal in non-irritated epidermis of these transgenic mice. Thus, interruption of signaling of all three isoforms of TGF-beta in basal and follicular cells does not disturb tissue homeostasis. However, during tumor promotion transgenic mice showed an elevated level of proliferation in the epidermis. This hyperproliferation correlated with a very early onset of carcinoma development and a malignant conversion frequency of 30% from benign papillomas to carcinomas. By comparison, the conversion frequency in wild-type mice of this strain has previously been reported as 5.5%. Even without induction of hyperproliferation by tumor promoters, transgenic mice developed far more carcinomas as controls when treated with a carcinogen. This result indicates that there is a synergistic effect between loss of TGF-beta responsiveness and mutations caused by initiation with a carcinogen leading to an endogenous tumor promotion in initiated cells only.