Previously, no inhibitors of placental differentiation have been described. In this study, we determined the effect of transforming growth factor beta-1 (TGF-beta-1) on cytotrophoblast differentiation. Monolayer cultures of pure cytotrophoblasts were exposed to 0.001-10 ng/ml TGF-beta-1 with and without the presence of 10 ng/ml epidermal growth factor (EGF), an inducer of placental differentiation. Over 7 days of culture, in 11 separate experiments, phase contrast microscopy demonstrated marked inhibition of EGF-induced syncytial formation by TGF-beta-1. Basal human (h)CG and h-placental lactogen (PL) release were reduced compared to control by fractions of 0.75 (TGF-beta-1/control) and 0.54, respectively. EGF alone induced fractional (EGF/control) increases in hCG and hPL release of 2.46 and 2.68, respectively. However, this stimulation was significantly inhibited by 10 ng/ml TGF-beta-1. Dose-response studies showed that maximal TGF-beta-1 inhibition of EGF-stimulated hormone secretion occurred at 0.1 ng/ml or more TGF-beta-1. Partial differentiation (syncytium formation) occurred despite the presence of TGF-beta-1, suggesting a portion of cytotrophoblasts were committed to differentiation at the time of culture. We conclude that TGF-beta-1 acts as a major inhibitor of trophoblast differentiation and concomitant peptide hormone secretion.