Transforming growth factor beta 1 (TGF-beta 1) has been shown to be associated with active centers of hematopoiesis and lymphopoiesis in the developing fetus. Therefore, the effects of TGF-beta 1 on mouse hematopoiesis were studied. TGF-beta 1 is a potent inhibitor of IL-3-induced bone marrow proliferation, but it does not inhibit the proliferation induced by granulocyte/macrophage, colony-stimulating factor (CSF), granulocyte CSF, and erythropoietin (Epo). TGF-beta 1 also inhibits IL-3-induced multipotential colony formation of bone marrow cells in soft agar, which includes early erythroid differentiation, while Epo-induced terminal differentiation is unaffected. In addition, IL-3-induced granulocyte/macrophage colonies were inhibited; however, small clusters of differentiated myeloid cells were consistently seen in cultures containing IL-3 and TGF-beta 1. Thus, TGF-beta 1 selectively inhibits early hematopoietic progenitor growth and differentiation but not more mature progenitors. TGF-beta 1 is also a potent inhibitor of IL-3-dependent and -independent myelomonocytic leukemic cell growth, while the more mature erythroid and macrophage leukemias are insensitive. Therefore, TGF-beta 1 functions as a selective regulator of differentiating normal hematopoietic cells, and suppresses myeloid leukemic cell growth.