The activated form of TGF‐β is a known regulator of epithelial cell autonomous tumor initiation, progression, and metastasis. Recent studies have also indicated that TGF‐β mediates interactions between cancer cells and their local tumor microenvironment. Specifically, the loss of TGF‐β signaling in stromal components including fibroblasts and T‐cells can result in an “activated” microenvironment that supports and even initiates transformation of adjacent epithelial cells. TGF‐β signaling in cancer can be regulated through mechanisms involving ligand activation and expression of essential components within the pathway including the receptors and downstream effectors. TGF‐β signaling in the tumor microenvironment significantly impacts carcinoma initiation, progression, and metastasis via epithelial cell autonomous and interdependent stromal–epithelial interactions in vivo. J. Cell. Biochem. 101: 851–861, 2007. © 2007 Wiley‐Liss, Inc.