Transforming growth factor-beta (TGF-beta) distribution in basal cell carcinomas (BCCs) was studied using polyclonal antibodies recognizing intra- (precursor) and extracellular (activated) forms (LC 1-30 and CC 1-30), and compared with an index of cell proliferation (PCNA immunoreactivity). Intracellular TGF-beta is found in suprabasal keratinocytes and the outer root sheath. Extracellular TGF-beta is largely absent from normal skin, but is abundant in the intracellular spaces of hyperplastic epidermis overlying BCCs. Twenty-five of 29 BCCs showed increased extracellular TGF-beta in the desmoplastic stroma, with intercellular staining in nine of these. Intracellular TGF-beta was present in fibroblasts and endothelial cells, although only 17 of 29 BCCs were positive, predominantly in central cells showing apparent maturation. Little correlation was seen between the degree of staining of tumour cells and the distribution of extracellular TGF-beta. PCNA immunoreactivity was greater in BCCs compared with normal epidermis in 24 of 37 cases (P = 0.005), and was concentrated on the periphery of nodular BCCs. Strongest stromal reactivity for TGF-beta and maximal PCNA index also showed a significant correlation (P = 0.023). This study demonstrated abundant TGF-beta in the active stroma around BCCs, which may account for many of the morphological and functional characteristics of this tumour, but which may be a product of stromal rather than tumour cells.