Transforming growth factor beta1 (TGF-beta1) is the prototypic member of a large family of structurally related pleiotropic-secreted cytokines that play a pivotal role in the control of differentiation, proliferation, and state of activation of many different cell types including immune cells. TGF-beta family members have potent immunosuppressor activities in vitro and in vivo. These cytokines trigger their biological effects by inducing the formation of a heteromeric transmembrane serine/threonine kinase receptor complex. These receptors then initiate intracellular signaling through activation of Smad proteins, and specific Smads become phosphorylated and associate with other Smads. These heteromeric Smad complexes accumulate in the nucleus, where they modulate the expression of target genes. Recent data support the notion that Smads are important intracellular effectors of TGF-beta in immune cells. Here, we review recent advances in TGF-beta signal transduction in immune cells.