The growth-suppressive function of the retinoblastoma gene product, RB, has been ascribed to the underphosphorylated RB form that prevails during G1 phase in the cell cycle. We show that addition of the paracrine growth inhibitor transforming growth factor beta 1 (TGF-beta 1) to Mv1Lu lung epithelial cells in mid to late G1 prevents phosphorylation of RB scheduled for this cell cycle stage and arrests cells in late G1. Expression of SV40 T antigen, a transforming protein that binds underphosphorylated RB, does not block the effect of TGF-beta 1 on RB phosphorylation but greatly reduces the growth-inhibitory response to TGF-beta 1. TGF-beta 1 and RB appear to function in a common growth-inhibitory pathway in which TGF-beta 1 acts to retain RB in the underphosphorylated, growth-suppressive state.