We reported earlier that patients with breast or pancreas cancer have an increased prevalence of regulatory T cells (T-reg) in the blood and tumor draining lymph nodes (TDLNs) compared with healthy individuals. In the current study, we tested the hypothesis that tumor cells promote the prevalence of T-reg. The transforming growth factor-beta (TGF-beta) secreting murine pancreas adenocarcinoma, Pan02 cell line was injected into syngeneic C57BL/6 mice and the prevalence of T-reg in the TDLNs and tumor spleen was measured weekly. Compared with control mice, the prevalence of CD25(+) CD4(+) cells in TDLNs and in tumor spleen increased with tumor growth. Analysis of these CD25(+) CD4(+) T cells in vitro confirmed expression of the T-reg marker, Foxp3. In addition, their functional activity resembled that of Tr,g, as evidenced by a poor proliferative capacity; suppression of proliferation of CD25(-) CD4 or CD8T cells and inhibition of interferon-gamma release by CD25(-) CD4(+) T cells. Reconstitution of Pan02-bearing Rag(-/-) mice with naive syngeneic CD25(-) CD4(+) T cells induced CD25(+) CD4(+) Foxp3(+) T cells in TDLNs, but not in the spleen. In contrast, Foxp3 was not detected in unreconstituted Pan02-bearing Rag(-/-) mice, or reconstituted mice bearing a TGF-beta-negative esophageal tumor. Furthermore, administration of neutralizing anti-TGF-beta antibody blocked the induction of Foxp3 in reconstituted Pan02-bearing Rag(-/-) mice. These results mimic earlier in vitro studies showing induction of Foxp3 through CD3 plus CD28 stimulation in the presence of TGF-beta. We conclude that Pan02 tumor promotes the prevalence of T-reg, in part through the secretion of TGF-beta, which may result in immune evasion.