Immune homeostasis is a delicate balance between the immune defense against foreign pathogens and suppression of the immune system to maintain self-tolerance and prevent autoimmune disease. Maintenance of this balance involves several crucial networks of cytokines and various cell types. Among these regulators, transforming growth factor-beta (TGF-beta) is a potent cytokine with diverse effects on hematopoietic cells. Its pivotal function within the immune system is to maintain tolerance via the regulation of lymphocyte proliferation, differentiation, and survival. In addition, TGF-beta controls the initiation and resolution of inflammatory responses through the regulation of chemotaxis and activation of leukocytes in the periphery, including lymphocytes, natural killer cells, dendritic cells, macrophages, mast cells, and granulocytes. Through its pleiotropic effects on these immune cells, TGF-beta prevents the development of autoimmune diseases without compromising immune responses to pathogens. However, overactivation of this pathway can lead to several immunopathologies under physiologic conditions including cancer progression, making it an attractive target for antitumor therapies. This review discusses the biological functions of TGF-beta and its effects on the immune system and addresses how immunosuppression by this cytokine can promote tumorigenesis, providing the rationale for evaluating the immune-enhancing and antitumor effects of inhibiting TGF-beta in cancer patients.