The transforming growth factor beta (TGF-β) signaling pathway exerts opposing effects on cancer cells, acting as either a tumor promoter or a tumor suppressor. Here, we show that these opposing effects are a result of the synergy between SMAD3, a downstream effector of TGF-β signaling, and the distinct epigenomes of breast-tumor-initiating cells (BTICs). These effects of TGF-β are associated with distinct gene expression programs, but genomic SMAD3 binding patterns are highly similar in the BTIC-promoting and BTIC-suppressing contexts. Our data show cell-type-specific patterns of DNA and histone modifications provide a modulatory layer by determining accessibility of genes to regulation by TGF-β/SMAD3. LBH, one such context-specific target gene, is regulated according to its DNA methylation status and is crucial for TGF-β-dependent promotion of BTICs. Overall, these results reveal that the epigenome plays a central and previously overlooked role in shaping the context-specific effects of TGF-β in cancer. Display omitted •TGF-β has opposing effects in different breast-tumor-initiating cell (BTIC) types•Genomic SMAD3 binding patterns are similar in BTICs with opposing responses to TGF-β•BTIC type-specific epigenomes prime genes for regulation by TGF-β/SMAD3•LBH, a type-specific TGF-β target, is essential for BTIC-promoting effects of TGF-β The TGF-β pathway uses transcriptional regulation through SMAD transcription factors to modulate cell-context-specific phenotypes. Tufegdzic Vidakovic et al. show that in breast-tumor-initiating cells (BTICs), type-specific DNA and histone modifications help determine whether the response to TGF-β is pro-oncogenic or tumor suppressive. These landscapes act both in synergy and independently of cell-type-specific SMAD3 binding to TGF-β target genes to modulate context-specific transcriptional regulation by TGF-β/SMAD3.