Transforming growth factor β (TGF-β) is a potent growth regulator and tumor suppressor in normal intestinal epithelium. Likewise, epithelial cell growth is controlled by rapid decay of growth-related mRNAs mediated through 3' untranslated region (UTR) AU-rich element (ARE) motifs. We demonstrate that treatment of nontransformed intestinal epithelial cells with TGF-β inhibited ARE-mRNA expression. This effect of TGF-β was promoted through increased assembly of cytoplasmic RNA processing (P) bodies where ARE-mRNA localization was observed. P-body formation was dependent on TGF-β/Smad signaling, as Smad3 deletion abrogated P-body formation. In concert with increased P-body formation, TGF-β induced expression of the ARE-binding protein tristetraprolin (TTP), which colocalized to P bodies. TTP expression was necessary for TGF-β-dependent P-body formation and promoted growth inhibition by TGF-β. The significance of this was observed in vivo, where colonic epithelium deficient in TGF-β/Smad signaling or TTP expression showed attenuated P-body levels. These results provide new insight into TGF-β's antiproliferative properties and identify TGF-β as a novel mRNA stability regulator in intestinal epithelium through its ability to promote TTP expression and subsequent P-body formation.