Transforming growth factor-beta (TGF-beta) and its related proteins regulate broad aspects of body development, including cell proliferation, differentiation, apoptosis and gene expression, in various organisms. Deregulated TGF-beta function has been causally implicated in the generation of human fibrotic disorders and in tumor progression. Nevertheless, the molecular mechanisms of TGF-beta action remained essentially unknown until recently. Here, we discuss recent progress in our understanding of the mechanism of TGF-beta signal transduction with respect to the regulation of gene expression, the control of cell phenotype and the potential usage of TGF-beta for the treatment of human diseases.