We present a geometric approach to defining an algebra Ĝ (M) (the Colombeau algebra) of generalized functions on a smooth manifold M containing the space DOE(M) of distributions on M. Based on differential calculus in convenient vector spaces we achieve an intrinsic construction of Ĝ (M). Ĝ (M) is a differential algebra, its elements possessing Lie derivatives with respect to arbitrary smooth vector fields. Moreover, we construct a canonical linear embedding of