In normal epithelial tissues, the multifunctional cytokine transforming growth factor-beta (TGF-beta) acts as a tumor suppressor through growth inhibition and induction of differentiation whereas in advanced cancers, TGF-beta promotes tumor progression through induction of tumor invasion, neoangiogenesis, and immunosuppression. The molecular mechanisms through which TGF-beta shifts from a tumor suppressor to a tumor enhancer are poorly understood. We now show a role for the tumor suppressor phosphatase and tensin homologue deleted on chromosome 10 (PTEN) in repressing the protumorigenic effects of TGF-beta. The TGF-beta effector SMAD3 inducibly interacts with PTEN on TGF-beta treatment under endogenous conditions. RNA interference (RNAi) suppression of PTEN expression enhances SMAD3 transcriptional activity and TGF-beta-mediated induction of SMAD3 target genes whereas reconstitution of PTEN in a null cancer cell line represses the expression of TGF-beta-regulated target genes. Targeting PTEN expression through RNAi in a PTEN wild-type cell line increases TGF-beta-mediated invasion but does not affect TGF-beta-mediated growth inhibition. Reconstitution of PTEN expression in a PTEN-null cell line blocks TGF-beta-induced invasion but does not modulate TGF-beta-mediated growth regulation. These effects are distinct from Akt and Forkhead family members that also interact with SMAD3 to regulate apoptosis or proliferation, respectively. Pharmacologic inhibitors targeting TGF-beta receptors and phosphatidylinositol 3-kinase signaling downstream from PTEN cooperate to block TGF-beta-mediated invasion. Thus, the loss of PTEN expression in human cancers may contribute to a role for TGF-beta as a tumor enhancer with specific effects on cellular motility and invasion.