p12(CDK2-AP1) (p12) is a growth suppressor isolated from normal keratinocytes. Ectopic expression of p12 in squamous carcinoma cells reversed the malignant phenotype of these cells, in part due an ability of p12 to bind to both DNA polymerase alpha/primase and to cyclin-dependent kinase 2 (CDK2), thereby inhibiting their activities. We report in this article that in normal epithelial cells, transforming growth factor beta1 (TGF-beta1) induces p12 expression transcriptionally, which, in turn, mediates the growth inhibitory activity of TGF-beta1. We created inducible p12 antisense HaCaT cell lines [ip12 (-) HaCaT] and showed that selective reduction of cellular p12 resulted in an increase in (a) CDK2-associated kinase activity; (b) protein retinoblastoma (pRB) phosphorylation; and (c) [(3)H]thymidine incorporation, and partially reversed TGF-beta1-mediated inhibition of CDK2 kinase activity, pRB phosphorylation, and cell proliferation. Furthermore, we generated p12-deficient mouse oral keratinocytes (MOK(p12-/-)) and compared their growth characteristics and response to TGF-beta1 with that of wild-type mouse oral keratinocytes (MOK(WT)). Under normal culture conditions, the number of MOK(p12-/-) in S phase is 2-fold greater than that of MOK(WT). Concomitantly, fewer cells are in G(2) phase in MOK(p12-/-) than that in MOK(WT). Moreover, response to TGF-beta1-mediated growth suppression is compromised in MOK(p12-/-) cells. Mechanistic studies showed that MOK(p12-/-) have increased CDK2 activity and reduced sensitivity to inhibition by TGF-beta1. Collectively our data suggest that p12 plays a role in TGF-beta1-mediated growth suppression by modulating CDK2 activities and pRB phosphorylation.