Transforming growth factor-β1 (TGF-β1) is an important anti-inflammatory cytokine that modulates and resolves inflammatory responses. Recent studies have demonstrated that inflammation enhances neoplastic risk and potentiates tumor progression. In the evolution of cancer, pro-inflammatory cytokines such as IL-1β must overcome the anti-inflammatory effects of TGF-β to boost pro-inflammatory responses in epithelial cells. Here we show that IL-1β or Lipopolysaccharide (LPS) suppresses TGF-β-induced anti-inflammatory signaling in a NF-κB-independent manner. TRAF6, a key molecule in IL-1β signaling, mediates this suppressive effect through interaction with the type III TGF-β receptor (TβRIII), which is TGF-β-dependent and requires type I TGF-β receptor (TβRI) kinase activity. TβRI phosphorylates TβRIII at residue S829, which promotes the TRAF6/TβRIII interaction and consequent sequestration of TβRIII from the TβRII/TβRI complex. Our data indicate that IL-1β enhances the pro-inflammatory response by suppressing TGF-β signaling through TRAF6-mediated sequestration of TβRIII, which may be an important contributor to the early stages of tumor progression.