Murine embryonic stem (ES) cells are maintained in an undifferentiated state when cultured in medium conditioned by Buffalo rat liver (BRL) cells. BRL conditioned medium (CM) contains a differentiation inhibitory activity (DIA) that is synonymous with leukemia inhibitory factor (LIF). ES cells in monolayer culture can be induced to differentiate by addition of all-trans retinoic acid (RA) to the BRL CM, when they mainly form cells resembling parietal endoderm, or by culture in medium not conditioned by BRL cells. ES cells thus deprived of LIF/DIA differentiate spontaneously to a cell type that expresses Brachyury (T), a marker of early mesoderm. Northern blot analyses have shown previously that transcripts for transforming growth factor beta 1 (TGF-beta 1) are detected in undifferentiated cells while transcripts for TGF-beta 2 and TGF-beta 3 only become detectable after differentiation. We have now determined levels of TGF-beta protein in CM and in the extracellular matrix (ECM) and have used neutralizing antibodies specific for TGF-beta 1 and TGF-beta 2 that do not react with recombinant human TGF-beta 3 to determine the isoform secreted. Using the growth inhibition of mink lung CCL64 cells as a bioassay for TGF-beta activity, we demonstrate that undifferentiated ES cells secrete latent TGF-beta 1 into the medium but no activity is found in their ECM. Cells induced to differentiate with RA contain TGF-beta 2 in both active and latent forms in their CM. Likewise their ECM contains TGF-beta 2 as the sole isoform. ES cells deprived of LIF/DIA secrete both TGF-beta 1 and TGF-beta 2 isoforms in their CM but TGF-beta-like activity remains after addition of neutralizing antibodies for TGF-beta 1 and TGF-beta 2. This active TGF beta is the major component of the TGF-beta activity in this CM. By contrast, ECM from LIF/DIA deprived cells contains only the TGF-beta 1 and beta 2 isoforms. The remaining activity in CM correlates with high expression of TGF-beta 3 by Northern blot analysis in these cells. We speculate that TGF-beta 3 is secreted by these cells and may be activated more efficiently and/or in a different manner to TGF-beta 1 and TGF-beta 2, since it is present in CM only in its active form.