The TGFβ signaling pathway is one of the most important mechanisms in the maintenance of epithelial homeostasis. Alterations leading to either the repression or enhancement of this pathway have been shown to affect cancer development. Although TGFβ inhibits growth of normal epithelial cells, it is paradoxically overexpressed in many epithelial cancers. It has been postulated that TGFβ acts as a tumor suppressor at the early stages of carcinogenesis, but overexpression of TGFβ at late stages of carcinogenesis may be a critical factor for tumor invasion and metastasis. The detailed mechanisms regulating this functional switch of TGFβ remain to be elucidated. The relevance of the TGFβ signaling pathway to the development of primary epithelial tumors in man has been further substantiated by the discovery of mutations in TGFβ receptors and in the downstream signaling mediators, the Smads. The epidermis is one of the major targeting tissues for TGFβ signaling. Chemical carcinogenesis studies have revealed a paradoxical effect of TGFβ on skin carcinogenesis: inhibition of papilloma formation but promotion of malignant conversion. In addition, deletion of the TGFβ type II receptor accelerates skin carcinogenesis. This review focuses on our current understanding of the role of TGFβ signaling in skin carcinogenesis. Microsc. Res. Tech. 52:420–429, 2001. © 2001 Wiley‐Liss, Inc.