TGF-β is an important immunomodulatory cytokine that can inhibit differentiation of effector T cells. In this report, we address the molecular mechanisms through which TGF-β inhibits differentiation of CD4+ cells into Th type 2 cells. We demonstrate that TGF-β inhibits GATA-3 expression in developing Th cells. We also show that inhibition of GATA-3 expression by TGF-β is a major mechanism of inhibition of Th2 differentiation by TGF-β as ectopic expression of GATA-3 in developing T cells overcomes the ability of TGF-β to inhibit Th2 differentiation. TGF-β likely inhibits GATA-3 expression at the transcriptional level and does so without interfering with IL-4 signaling.