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CD4+25+Foxp3+ regulatory T cells (Treg) play a critical role in the induction of tolerance to tumor-associated antigens and suppression of antitumor immunity. How Treg are induced in cancer is poorly understood. We reported previously that Treg are significantly elevated in the peripheral blood of patients with pancreas cancer and that in a murine pancreas cancer model induction of Treg seems to be transforming growth factor (TGF)-β dependent. Here we provide additional evidence that Treg are increased locally within the tumor microenvironment by a mechanism that seems dependent on TGF-β receptor expression and the presence of tumor derived TGF-β. The murine pancreas cancer cell line Pan02 produces high levels of TGF-β both in vitro and in vivo. In contrast, the esophageal murine cancer cell line, Eso2, does not. Immunohistochemical staining of Foxp3 in explanted tumors shows an identifiable population of Treg in the Pan02 (TGF-β positive) tumors but not Eso2 (TGF-β negative). Naive CD4+25−Foxp3− T cells, when adoptively transferred into Rag−/− mice, are converted into Foxp3+ Treg in the presence of Pan02 but not Eso2 tumors. Induction of Treg in Pan02 mice is blocked by systemic injection of an anti–TGF-β antibody. If Rag−/− mice are instead reconstituted with naive CD4+25− T cells expressing a mutated TGF-β receptor, induction of Foxp3+ Treg in Pan02 bearing mice is blocked. Collectively, these observations further support the role of TGF-β in the induction of Treg in pancreas adenocarcinoma.