The transforming growth factor-beta (TGF-beta) superfamily of growth factors is responsible for a variety of physiologic actions, including cell cycle regulation. Activin is a member of the TGF-beta superfamily that inhibits the proliferation of breast cancer cells. Activin functions by interacting with its type I and type II receptors to induce phosphorylation of intracellular signaling molecules known as Smads. Smads regulate transcription of many genes in a cell- and tissue-specific manner. In this study, the role of activin A in growth regulation of breast cancer cells was investigated. Activin stimulated the Smad-responsive promoter, p3TP, 2-fold over control in T47D breast cancer cells. Activin inhibited cellular proliferation of T47D breast cancer cells after 72 hours, an effect that could be abrogated by incubation with the activin type I receptor inhibitor, SB431542. Activin arrested T47D cells in the G0-G1 cell cycle phase. Smad2 and Smad3 were phosphorylated in response to activin and accumulated in the nucleus of treated T47D cells. Infection of T47D cells with adenoviral Smad3 resulted in cell cycle arrest and activation of p3TP-luciferase, whereas a adenoviral dominant-negative Smad3 blocked activin-mediated cell cycle arrest and gene transcription. Activin maintained expression of p21 and p27 cyclin-dependent kinase inhibitors involved in cell cycle control, enhanced expression of p15, reduced cyclin A expression, and reduced phosphorylation of the retinoblastoma (Rb) protein. Smad3 overexpression recapitulated activin-induced p15 expression and repression of cyclin A and Rb phosphorylation. These data indicate that activin A inhibits breast cancer cellular proliferation and activates Smads responsible for initiating cell cycle arrest.