The T-box transcription factor, TBX3, plays an important role in embryonic development, and haploinsufficiency of TBX3 causes ulnar-mammary syndrome. Overexpression of TBX3, on the other hand, is associated with several cancers, and preliminary evidence suggests that increased levels of TBX3 may inhibit cell proliferation but promote tumor migration and invasion. Although this suggests that deregulated levels of TBX3 are deleterious in development and promotes disease, very little is known about the signaling pathways that regulate TBX3 expression. Here we show that overexpressing TBX3 inhibits proliferative ability while promoting the migration of breast epithelial cells. We demonstrate that the transforming growth factor β1 (TGF-β1) pathway up-regulates TBX3 protein and mRNA levels and show a detailed transcriptional mechanism by which this occurs. Using in vitro and in vivo assays, we show that Smad3/4 and JunB bind and cooperatively regulate TBX3 promoter activity through a Smad-binding element at -67 base pairs. Further, we show that TBX3 plays a pivotal role in mediating the antiproliferative and promigratory role of TGF-β1 in breast epithelial and skin keratinocytes. This study identifies the TGF-β1 signaling pathway as a potentially important player in the regulation of TBX3 in development and cancer.