Group A streptococcal cell wall (SCW)-injected rats exhibit a profound immunosuppression that persists for months after the initial intraperitoneal injection of SCW. The goal of this study was to determine the mechanisms for the suppressed T lymphocyte proliferative responses in this experimental model of chronic inflammation. When spleen cell preparations were depleted of adherent cells, restoration of T cell proliferative responses to Con A and PHA occurred, implicating adherent macrophages in the regulation of immunosuppression. Furthermore, macrophages from SCW-treated animals, when cocultured with normal spleen cells in the presence of Con A or PHA, effectively inhibited the proliferative response. Supernatants from suppressed spleen cell cultures were found to inhibit normal T cell mitogenesis. Taken together, these results implicated a soluble macrophage-derived suppressor factor in the down regulation of T cell proliferation after exposure to SCW in vivo. Subsequent in vitro studies to identify this suppressor molecule(s) revealed the activity to be indistinguishable from the polypeptide transforming growth factor beta (TGF-beta). Furthermore, TGF-beta was identified by immunolocalization within the spleens of SCW-injected animals. The cells within the spleen that stained positively for TGF-beta were phagocytic cells that had ingested, and were presumably activated by, the SCW. These studies document that TGF-beta, previously shown to be a potent immunosuppressive agent in vitro, also effectively inhibits immune function in chronic inflammatory lesions in vivo.