Transforming growth factor-beta 1 (TGF-beta 1) has been shown to up-regulate the synthesis of nerve growth factor (NGF) in cultured rat astrocytes and in neonatal brain in vivo (Lindholm, D., B. Hengerer, F. Zafra, and H. Thoenen. 1990. NeuroReport. 1:9-12). Here we show that mRNA encoding TGF-beta 1 increased in rat cerebral cortex after a penetrating brain injury. The level of NGF mRNA is also transiently increased after the brain trauma, whereas that of brain-derived neurotrophic factor remained unchanged. In situ hybridization experiments showed a strong expression of TGF-beta 1 4 d after the lesion in cells within and in the vicinity of the wound. Staining of adjacent sections with OX-42 antibodies, specific for macrophages and microglia/brain macrophages, revealed a similar pattern of positive cells, suggesting that invading macrophages, and perhaps reactive microglia, are the source of TGF-beta 1 in injured brain. Both astrocytes and microglia express TGF-beta 1 in culture, and TGF-beta 1 mRNA levels in astrocytes are increased by various growth factors, including FGF, EGF, and TGF-beta itself. TGF-beta 1 is a strong inhibitor of astrocyte proliferation and suppresses the mitotic effects of FGF and EGF on astrocytes. The present results indicate that TGF-beta 1 expressed in the lesioned brain plays a role in nerve regeneration by stimulating NGF production and by controlling the extent of astrocyte proliferation and scar formation.