In the present study, we demonstrated that human skin cancers frequently overexpress TGF-beta1 but exhibit decreased expression of the TGF-beta type II receptor (TGF-(beta)RII). To understand how this combination affects cancer prognosis, we generated a transgenic mouse model that allowed inducible expression of TGF-beta(1) in keratinocytes expressing a dominant negative TGF-(beta)RII (Delta(beta)RII) in the epidermis. Without Delta(beta)RII expression, TGF-beta1 transgene induction in late-stage, chemically induced papillomas failed to inhibit tumor growth but increased metastasis and epithelial-to-mesenchymal transition (EMT), i.e., formation of spindle cell carcinomas. Interestingly, Delta(beta)RII expression abrogated TGF-beta1-mediated EMT and was accompanied by restoration of membrane-associated E-cadherin/catenin complex in TGF-beta1/Delta(beta)RII compound tumors. Furthermore, expression of molecules thought to mediate TGF-beta1-induced EMT was attenuated in TGF-beta1/Delta(beta)RII-transgenic tumors. However, TGF-beta1/Delta(beta)RII-transgenic tumors progressed to metastasis without losing expression of the membrane-associated E-cadherin/catenin complex and at a rate higher than those observed in nontransgenic, TGF-beta1-transgenic, or Delta(beta)RII-transgenic mice. Abrogation of Smad activation by Delta(beta)RII correlated with the blockade of EMT. However, Delta(beta)RII did not alter TGF-beta1-mediated expression of RhoA/Rac and MAPK, which contributed to increased metastasis. Our study provides evidence that TGF-beta1 induces EMT and invasion via distinct mechanisms. TGF-beta1-mediated EMT requires functional TGF-(beta)RII, whereas TGF-beta1-mediated tumor invasion cooperates with reduced TGF-(beta)RII signaling in tumor epithelia.