The potent growth-inhibitory activity of cytokines of the transforming growth factor-β (TGF-β) superfamily and their widespread expression in epithelia suggest that they may play an important role in the maintenance of epithelial homeostasis. To analyse TGF-β mediated tumor suppressor activity in the liver, we generated transgenic mice overexpressing a dominant negative type II TGF-β receptor in hepatocytes under control of the regulatory elements of the human C-reactive protein gene promoter. Transgenic animals exhibited constitutive and liver-specific transgene expression. The functional inactivation of the TGF-β signaling pathway in transgenic hepatocytes was shown by reduced TGF-β induced inhibition of DNA synthesis in primary hepatocyte cultures. Liver morphology and spontaneous tumorigenesis were unchanged in transgenic mice suggesting that interruption of the signaling of all three isoforms of TGF-β in hepatocytes does not disturb tissue homeostasis in the liver under physiological conditions. However, following initiation with the carcinogen diethylnitrosamine and tumor-promotion with phenobarbital transgenic mice exhibited a moderate albeit significant increase in the incidence, size and multiplicity of both preneoplastic tissue lesions in the liver and of hepatocellular carcinomas. These results give in vivo evidence for a tumor suppressor activity of the endogeneous TGF-β system in the liver during chemical hepatocarcinogenesis.