Cytokines in the developing tumor microenvironment (TME) can drive transformation and subsequent progression toward metastasis. Elevated levels of the Interleukin-6 (IL-6) family cytokine Oncostatin M (OSM) in the breast TME correlate with aggressive, metastatic cancers, increased tumor recurrence, and poor patient prognosis. Paradoxically, OSM engages a tumor-suppressive, Signal Transducer and Activator of Transcription 3 (STAT3)-dependent senescence response in normal and non-transformed human mammary epithelial cells (HMEC). Here, we identify a novel link between OSM-activated STAT3 signaling and the Transforming Growth Factor-β (TGF-β) signaling pathway that engages senescence in HMEC. Inhibition of functional TGF-β/SMAD signaling by expressing a dominant-negative TGF-β receptor, treating with a TGF-β receptor inhibitor, or suppressing SMAD3 expression using a SMAD3-shRNA prevented OSM-induced senescence. OSM promoted a protein complex involving activated-STAT3 and SMAD3, induced the nuclear localization of SMAD3, and enhanced SMAD3-mediated transcription responsible for senescence. In contrast, expression of MYC (c-MYC) from a constitutive promoter abrogated senescence and strikingly, cooperated with OSM to promote a transformed phenotype, epithelial-mesenchymal transition (EMT), and invasiveness. Our findings suggest that a novel STAT3/SMAD3-signaling axis is required for OSM-mediated senescence that is coopted during the transformation process to confer aggressive cancer cell properties. Understanding how developing cancer cells bypass OSM/STAT3/SMAD3-mediated senescence may help identify novel targets for future “pro-senescence” therapies aiming to reengage this hidden tumor-suppressive response.