TGF-beta is a multifunctional growth regulator that can either inhibit or stimulate the growth and differentiation of lymphocytes. For several cell types the effect of TGF-beta was found to correlate with the differentiation stage of the cells. We have studied the influence of TGF-beta on the differentiation of murine thymocytes by evaluating the effect of TGF-beta on the generation of thymocyte subpopulations in fetal thymus organ culture. TGF-beta inhibited the growth and differentiation of CD4-CD8- double-negative thymocytes. In the CD4-CD8- double-negative cell population, most cells remained CD44+CD25-, with CD44+CD25+ and CD44-CD25- subpopulations dramatically decreased in cell numbers. The accumulation of cells with a phenotype characteristic of cells in early stage of differentiation suggests a block at very early transition steps. These observations were confirmed in experiments with precursor cells from fetal liver transferred to 2-deoxyguanosine-treated alymphoid thymic lobes, inasmuch as addition of TGF-beta caused a complete inhibition of T cell development. Differentiation into CD4+CD8+ double-positive thymocytes and CD4+ single-positive thymocytes was impaired because these cell numbers were greatly reduced. In contrast, the CD8+ single-positive subpopulation retained normal cell numbers. This CD8+ population had characteristics of a mature subset as the cells expressed CD8 beta and high levels of TCR-alpha beta and CD3. This TCR-alpha beta + cell population was not actively dividing, suggesting that these cells arise de novo by differentiation.