Tumors escape from immune surveillance by producing the immunosuppressive cytokine TGF-beta. However, the mechanism by which TGF-beta inhibits T cell-mediated tumor clearance in vivo is unknown. We demonstrate that TGF-beta acts on cytotoxic T lymphocytes (CTLs) to specifically inhibit the expression of five cytolytic gene products-namely, perforin, granzyme A, granzyme B, Fas ligand, and interferon gamma-which are collectively responsible for CTL-mediated tumor cytotoxicity. Repression of granzyme B and interferon-gamma involves binding of TGF-beta-activated Smad and ATF1 transcription factors to their promoter regions, indicating direct and selective regulation by the TGF-beta/Smad pathway. Neutralization of systemic TGF-beta in mice enables tumor clearance with restoration of cytotoxic gene expression in antigen-specific CTLs in vivo. We suggest that TGF-beta suppresses CTL function in vivo through an anticytotoxic program of transcriptional repression.