Transforming growth factor-beta (TGF-beta) has been shown to play an essential role in the suppression of inflammation, yet recent studies have revealed the positive roles of TGF-beta in inflammatory responses. For example, TGF-beta induces Foxp3-positive regulatory T cells (iTregs) in the presence of interleukin-2 (IL-2), while in the presence of IL-6, it induces pathogenic IL-17 producing Th17 cells. TGF-beta inhibits the proliferation of immune cells as well as cytokine production via Foxp3-dependent and -independent mechanisms. Little is known about molecular mechanisms involved in immune suppression via TGF-beta; however, Smad2/3 have been shown to play essential roles in Foxp3 induction as well as in IL-2 and IFN-gamma suppression, whereas Th17 differentiation is promoted via the Smad-independent pathway. Interaction between TGF-beta and other cytokine signaling is important in establishing the balance of immunity and tolerance.