Transforming growth factor-beta1 (TGF-beta1) is a potent inhibitor of hematopoietic cell growth. Here we report that TGF-beta1 signals inhibition of IL-3-dependent 32D-123 murine myeloid cell growth by modulating the activities of cyclin E and cyclin-dependent kinase 2 (cdk2) proteins and their complex formation in the G1 phase of the cell cycle. Whereas the cyclin E protein was hyperphosphorylated in TGF-beta1 treated cells, TGF-beta1 decreased both the phosphorylation of cdk2 and the kinase activity of the cyclin E-cdk2 complex. Decreased cyclin E-cdk2 kinase activity correlated with decreased phosphorylation of the retinoblastoma-related protein p107. In support of these observations, transient overexpression of p107 inhibited the proliferation of the myeloid cells, and expression of antisense oligodeoxynucleotides to p107 mRNA blocked TGF-beta1 inhibition of myeloid cell growth. Furthermore, as reported previously, in 32D-123 TGF-beta1 treated cells, c-Myc protein expression was decreased. TGF-beta1 increased the binding of p107 to the transcription factor E2F, leading to decreased c-Myc protein levels. p107 inhibited E2F transactivation activity and was also found to bind the c-Myc protein, suggesting p107 negative regulation of c-Myc protein function. These studies demonstrate the modulation of p107 function by TGF-beta1 and suggest a novel mechanism by which TGF-beta1 blocks cell cycle progression in myeloid cells.