We have generated transgenic mice expressing a kinase-deficient type II transforming growth factor-beta (TGFbeta) receptor selectively on fibroblasts (TbetaRIIDeltak-fib). These mice develop dermal and pulmonary fibrosis. In the present study we explore activation of TGFbeta signaling pathways in this strain and examine the profibrotic properties of explanted transgenic fibroblasts including myofibroblast differentiation and abnormal metalloproteinase production. Gene expression profiles of littermate wild type or transgenic fibroblasts were compared using high-density gene arrays and validated by Taqman reverse transcriptase-PCR, Northern and Western blotting. Using a specific inhibitor (SD-208) we demonstrate that the abnormal phenotype of these cells is dependent upon TbetaRI kinase (ALK5) activity, and that transgenic fibroblasts show enhanced expression and activation of TGFbeta together with increased levels of wild type TbetaRII. Moreover, we confirm that transgene expression is itself regulated by TGFbeta and that expression at low levels facilitates signaling, whereas high level expression is inhibitory. For a subset of TGFbeta responsive genes basal up-regulation is normalized or suppressed by exogenous recombinant TGFbeta1 at time points coincident with increased transgene expression. These findings explain the profound refractoriness of TbetaRIIDeltak-fib fibroblasts to exogenous TGFbeta1, despite their activated phenotype. Thus, transgenic fibroblasts recapitulate many hallmark biochemical properties of fibrotic cells, including high level CTGF (CCN2) expression and type I collagen overproduction, altered MMP production, and myofibroblast differentiation. These cells also show an enhanced ability to contract collagen gel matrices. Our study demonstrates that altered high affinity TGFbeta receptor function may lead to ligand-dependent activation of downstream signaling, and provides further evidence of a pivotal role for sustained TGFbeta overactivity in fibrosis.