Stromal cells can have a significant impact on the carcinogenic process in adjacent epithelia. The role of transforming growth factor-beta (TGF-beta) signaling in such epithelial-mesenchymal interactions was determined by conditional inactivation of the TGF-beta type II receptor gene in mouse fibroblasts (Tgfbr2fspKO). The loss of TGF-beta responsiveness in fibroblasts resulted in intraepithelial neoplasia in prostate and invasive squamous cell carcinoma of the forestomach, both associated with an increased abundance of stromal cells. Activation of paracrine hepatocyte growth factor (HGF) signaling was identified as one possible mechanism for stimulation of epithelial proliferation. Thus, TGF-beta signaling in fibroblasts modulates the growth and oncogenic potential of adjacent epithelia in selected tissues.