TGF-beta is produced by tumors, and increased levels are associated with poor survival. Functionally, TGF-beta-mediated suppression of anti-tumor T cell responses contributes to tumor growth and survival. However, TGF-beta can also have tumor suppressive activity, and dissecting cell-type specific molecular effects may decisively inform therapeutic strategies targeting this cytokine. Here we investigated the mechanisms involved in suppression of a key anti-tumor CD4+ T cell function –interferon-gamma (IFN-gamma) production– by tumor-derived TGF-beta in human peripheral and tumor-associated lymphocytes. Suppression required expression and phosphorylation of TGF-beta signaling proteins (Smad proteins), but not their nuclear translocation, and was dependent on oxygen availability –suggesting a metabolic basis. Indeed, Smad proteins were detected in mitochondria of CD4+ T cells, where they were phosphorylated upon TGF-beta exposure. Phosphorylated Smad proteins were also detected ex vivo in mitochondria of tumor-associated lymphocytes. TGF-beta treatment significantly impaired ATP-coupled respiration of CD4+ T cells, and specifically mitochondrial complex V (ATP-Synthase) activity. Finally, inhibition of ATP-Synthase per se was sufficient to impair IFN-gamma production. These results demonstrate that TGF-beta targets T cell metabolism directly, thus diminishing their function (metabolic paralysis), with relevance to human anti-tumor immunity.