The tumor microenvironment (TME) consists of cancer cells surrounded by stromal components including tumor vessels. Transforming growth factor-β (TGF-β) promotes tumor progression by inducing epithelial–mesenchymal transition (EMT) in cancer cells and stimulating tumor angiogenesis in the tumor stroma. We previously developed an Fc chimeric TGF-β receptor containing both TGF-β type I (TβRI) and type II (TβRII) receptors (TβRI-TβRII-Fc), which trapped all TGF-β isoforms and suppressed tumor growth. However, the precise mechanisms underlying this action have not yet been elucidated. In the present study, we showed that the recombinant TβRI-TβRII-Fc protein effectively suppressed in vitro EMT of oral cancer cells and in vivo tumor growth in a human oral cancer cell xenograft mouse model. Tumor cell proliferation and angiogenesis were suppressed in tumors treated with TβRI-TβRII-Fc. Molecular profiling of human cancer cells and mouse stroma revealed that K-Ras signaling and angiogenesis were suppressed. Administration of TβRI-TβRII-Fc protein decreased the expression of heparin-binding epidermal growth factor-like growth factor (HB-EGF), interleukin-1β (IL-1β) and epiregulin (EREG) in the TME of oral cancer tumor xenografts. HB-EGF increased proliferation of human oral cancer cells and mouse endothelial cells by activating ERK1/2 phosphorylation. HB-EGF also promoted oral cancer cell-derived tumor formation by enhancing cancer cell proliferation and tumor angiogenesis. In addition, increased expressions of IL-1β and EREG in oral cancer cells significantly enhanced tumor formation. These results suggest that TGF-β signaling in the TME controls cancer cell proliferation and angiogenesis by activating HB-EGF/IL-1β/EREG pathways and that TβRI-TβRII-Fc protein is a promising tool for targeting the TME networks.