Human endometrium exhibits cyclic stromal and glandular remodeling in preparation of embryo implantation. We identified EBAF/LEFTY B as a soluble cytokine of the TGF-β superfamily that is expressed at a low level in human endometrium during the receptivity period, while it is maximally expressed during perimenstrual and menstrual phases. Transfection of cells with EBAF/LEFTY B resulted in expression of a 42 kD protein that was proteolytically processed to release two polypeptides of 34 and 28 kD. EBAF/LEFTY B causes tissue remodeling by induction of collagenolysis by matrix metalloproteases. In a subset of infertile patients, the expression EBAF/LEFTY B was prematurely increased during the implantation window. We showed that induced overexpression of EBAF/LEFTY B in transgenic mice impairs implantation. EBAF/LEFTY B inhibits the expression of key decidual proteins, IGFBP-1 and PRL, through regulation of transcription factors FOXO1 and ETS1. Together, these findings show that during embryonic development, EBAF/LEFTY B plays important roles in decidualization and embryo implantation.