Transforming growth factor beta (TGF-beta) is angiogenic in vivo. In vitro, endothelial cell proliferation is inhibited by TGF-beta. We have correlated this inhibitory effect with an increase in cellular fibronectin synthesis and deposition in a two-dimensional culture system using specific matrix coatings. The inhibitory effect was mimicked by addition of soluble fibronectin to cultures. In contrast, TGF-beta was found to elicit the formation of tube-like structures (mimicking angiogenesis) when microvascular endothelial cells were grown in three-dimensional collagen gels. In this culture system TGF-beta elicited rapid extensive formation of complex, branching, tube-like structures, while cell proliferation was not inhibited. These data confirm and support the hypothesis that TGF-beta is angiogenic and may exert some of its effects through modulation of matrix synthesis and are consistent with the hypothesis that the organization of the extracellular environment influences cellular responses to this "panregulin."