Transforming growth factor beta (TGFbeta) is one of few known negative regulators of hematopoiesis, yet the mechanisms by which it affects cell cycle arrest and stem cell quiescence are poorly understood. Induction of the cyclin-dependent kinase inhibitors, p15INK4b (p15) and p21WAF1 (p21) is important for TGFbeta-mediated cytostasis in epithelial cells but not in hematopoietic cells. Using primary human hematopoietic cells and microarray analysis, we identified p57KIP2 (p57) as the only cyclin-dependent kinase inhibitor induced by TGFbeta. Up-regulation of p57 mRNA and protein occurs before TGFbeta-induced G1 cell cycle arrest, requires transcription, and is mediated via a highly conserved region of the proximal p57 promoter. The up-regulation of p57 is essential for TGFbeta-induced cell cycle arrest in these cells, because two different small interfering RNAs that prevent p57 up-regulation block the cytostatic effects of TGFbeta on human hematopoietic cells. Reduction of basal p57 expression by this approach also allows hematopoietic cells to proliferate more readily in the absence of TGFbeta. p57 is a putative tumor suppressor gene whose expression is frequently silenced by promoter hypermethylation in hematologic malignancies. Our studies identify a molecular pathway by which TGFbeta mediates its cytostatic effects on human hematopoietic cells and suggests an explanation for the frequent silencing of p57 expression.