We have developed an in, vitro system to examine the influence of adipocytes, a major mammary stromal cell type, on the growth of a murine mammary carcinoma, SP1. Previously, we have shown that 3T3-L1 adipocytes release a mitogenic factor, hepatocyte growth factor, which strongly stimulates proliferation of SP1 cells. We now show that 3T3-L1 preadipocytes secrete active inhibitory molecules which inhibit DNA synthesis in SP1 cells. In addition, latent inhibitory activity is present in conditioned media (CM) from both pre-adipocytes and adipocytes, and is activated following acid treatment. CM also inhibited DNA synthesis in Mv1Lu wild type epithelial cells, but not DR27 mutant epithelial cells which lack TGF-beta type II receptor. Inhibitory activity of CMs was partially abrogated by neutralizing anti-TGF-beta 1 and anti-TGF-beta 2 antibodies, and was removed following ultrafiltration through membranes of 10 000 M-s but not 30 000 M-r pore size. These results show that the inhibitory effect on DNA synthesis is mediated by TGF-beta 1-like and TGF-beta 2-like molecules. In addition, acid-treated CM as well as purified TGF-beta inhibited differentiation of pre-adipocytes. Untreated pre-adipocyte CM, but not mature adipocyte CM, spontaneously inhibited adipocyte differentiation. Together, these findings indicate that pre-adipocytes spontaneously activate their own secreted TGF-beta, whereas mature adipocytes do not, and suggest that activation of TGF-beta has a potent negative regulatory effect on adipocyte differentiation and tumor growth. Thus, TGF-beta may be an important modulator of tumor growth and adipocyte differentiation via both paracrine and autocrine mechanisms. These findings emphasize the importance of adipocyte-tumor interactions in the regulation of tumor microenvironment.