TGF-beta is a potent regulatory cytokine that suppresses expression of inducible NO synthase and IFN-gamma, and suppresses Th1 and Th2 cell development. We examined whether functionally active TGF-beta is present in the local environment surrounding the invading protozoan Leishmania chagasi. Our prior data showed that TGF-beta levels are significantly increased in L. chagasi-infected mice. In the current study, we found TGF-beta was also abundant in bone marrows of humans with acute visceral leishmaniasis but not in those of uninfected controls. Furthermore, L. chagasi infection caused an increase in biologically active TGF-beta in human macrophage cultures without changing the total TGF-beta. Therefore, we investigated the means through which leishmania could augment activated but not total TGF-beta. Incubation of latent TGF-beta with Leishmania sp. promastigotes caused active TGF-beta to be released from the latent complex. In contrast, the nonpathogenic protozoan Crithidia fasciculata could not activate TGF-beta. TGF-beta activation by leishmania was prevented by inhibitors of cysteine proteases and by the specific cathepsin B inhibitor CA074. Physiologic concentrations of TGF-beta inhibited killing of intracellular L. chagasi in macrophages, although the phagocytosis-induced respiratory burst remained intact. In contrast, supraphysiologic concentrations of TGF-beta had no effect on parasite survival. We hypothesize that the combined effect of abundant TGF-beta stores at extracellular sites during infection, and the ability of the parasite to activate TGF-beta in its local environment, leads to high levels of active TGF-beta in the vicinity of the infected macrophage. Locally activated TGF-beta could, in turn, enhance parasite survival through its effects on innate and adaptive immune responses.