Transforming growth factor-beta (TGF-beta) is a key regulator of immune tolerance. In this paper, we will focus on T cells and natural killer (NK) cells, which are directly regulated by TGF-beta in vivo. TGF-beta controls T-cell activation and differentiation, and is involved in the suppressive function and generation of regulatory T cells. Recently, TGF-beta has also been shown to directly inhibit NK cell activity. These studies demonstrate that TGF-beta utilizes multiple mechanisms to ensure immune tolerance, which is critical in a variety of autoimmune and inflammatory disorders. We will also discuss recent advances on the role of TGF-beta in immune-mediated diabetes, inflammatory bowel disease, arthritis, and systemic lupus erythematosus.