Dendritic cells (DCs) have a central role in the development of adaptive immune responses, including antitumor immunity. Factors present in the tumor milieu can alter the maturation of DCs and inhibit their capacity to activate T cells. Using gene expression analysis, we found that human DCs increased the expression of TGF-beta 1. transcripts following culture with human lung carcinoma cells (LCCs). These DCs produced increased amounts of TGF-beta 1 protein compared with DCs not exposed to tumor cells. LCCs also decreased the expression or CD86 and HLA-DR by immature DCs. Furthermore, LCCs decreased CD86 expression and the production of TNF-alpha and IL-12 p70 by mature DCs. Moreover, LCCs also converted mature DCs into cells producing TGF-beta 1. These TGF-beta 1-producing DCs were poor at eliciting the activation of naive CD4(+) T cells and sustaining their proliferation and differentiation into Th1 (IFN-gamma(+)) effectors. Instead, TGF-beta 1 -producing DCs demonstrated an increased ability to generate CD4(+)CD25(+)Foxp3(+) regulatory T cells that suppress the proliferation of T lymphocytes. These results identify a novel mechanism by which the function of human DCs is altered by tumor cells and contributes to the evasion of the immune response. The Journal of Immunology, 2009, 182: 2795-2807.