Oligodendrocyte-type-2 astrocyte (O-2A) glial progenitor cells undergo a limited number of mitotic divisions in response to PDGF before differentiating into oligodendrocytes, the myelin-forming cell of the CNS. We examined the mechanism limiting O-2A proliferation, and demonstrate that these cells secrete an inhibitor of cell proliferation that can be neutralized with antibodies to TGF-beta. O-2A cells also secrete an inhibitory activity that cannot be neutralized with TGF-beta antibodies. O-2A progenitor cultures express TGF-beta 1 isoform and its transcript, while oligodendrocyte cultures express TGF-beta 1, beta-2, and beta-3 isoforms. Both recombinant TGF-beta 1 and O-2A conditioned medium inhibit the proliferation of O-2A progenitor cells cultured in the presence of PDGF, and this inhibition can be partially neutralized with polyclonal TGF-beta antibodies. Thus, TGF-beta produced by O-2A cells may limit PDGF-driven mitosis and promote oligodendrocyte development. TGF-beta is a less potent inhibitor of O-2A proliferation when these cells are cultured in the presence of bFGF, suggesting that bFGF interferes with TGF-beta signaling. Thus, the production of TGF-beta by cells in the O-2A lineage may account for the distinct effects of PDGF and bFGF on O-2A progenitor cell proliferation. Moreover, our results suggest that TGF-beta may be an important mediator of oligodendrocyte differentiation.