The biological effect of transforming growth factor-beta (TGF-beta) is cell type-specific and complex. The precise role of TGF-beta is not clear in vivo. To elucidate the regulation mechanism of endogenous TGF-beta on hepatoma progression, we modified the MH129F mouse hepatoma cell with a retroviral vector encoding the extracellular region of type II TGF-beta receptor (TRII). Soluble TRII (TRIIs) blocked TGF-beta binding to TRII on the membrane of hepatoma cells. Growth of MH129F cells was inhibited by TGF-beta1 treatment; however, soluble TRII-overexpressing cells (MH129F/TRIIs) did not show any change in proliferation after TGF-beta1 treatment. MH129F/TRIIs cells also increased vascular endothelial growth factor (VEGF) expression, endothelial cell migration, and tube formation. Implantation of MH129F/TRIIs cells into C3H/He mice showed the significantly enhanced tumor formation. According to Western blot and protein kinase C assay, the expression of VEGF, KDR/flk-1 receptor, and endothelial nitric-oxide synthase was enhanced, and the phosphorylation activity of protein kinase C was increased up to 3.7-fold in MH129F/TRIIs tumors. Finally, a PECAM-1-stained intratumoral vessel was shown to be 4.2-fold higher in the MH129F/TRIIs tumor. These results indicate that VEGF expression is up-regulated by a blockade of endogenous TGF-beta signaling in TGF-beta-sensitive hepatoma cells and then stimulates angiogenesis and tumorigenicity. Therefore, we suggest that endogenous TGF-beta is a major regulator of the VEGF/flk-1-mediated angiogenesis pathway in hepatoma progression.