Transforming growth factor β1 (TGF-β1) is known to be both anti-inflammatory and profibrotic. Cross-talk between TGF-β/Smad and Wnt/β-catenin pathways in epithelial-mesenchymal transition (EMT) suggests a specific role for β-catenin in profibrotic effects of TGF-β1. However, no such mechanistic role has been demonstrated for β-catenin in the anti-inflammatory effects of TGF-β1. In the present study, we explored the role of β-catenin in the profibrotic and anti-inflammatory effects of TGF-β1 by using a cytosolic, but not membrane, β-catenin knockdown chimera (F-TrCP-Ecad) and the β-catenin/CBP inhibitor ICG-001. TGF-β1 induced nuclear Smad3/β-catenin complex, but not β-catenin/LEF-1 complex or TOP-flash activity, during EMT of C1.1 (renal tubular epithelial) cells. F-TrCP-Ecad selectively degraded TGF-β1-induced cytoplasmic β-catenin and blocked EMT of C1.1 cells. Both F-TrCP-Ecad and ICG-001 blocked TGF-β1-induced Smad3/β-catenin and Smad reporter activity in C1.1 cells, suggesting that TGF-β1-induced EMT depends on β-catenin binding to Smad3, but not LEF-1 downstream of Smad3, through canonical Wnt. In contrast, in J774 macrophages, the β-catenin level was low and was not changed by interferon-γ (IFN-γ) or lipopolysaccharide (LPS) with or without TGF-β1. TGF-β1 inhibition of LPS-induced TNF-α and IFN-γ-stimulated inducible NO synthase (iNOS) expression was not affected by F-TrCP-Ecad, ICG-001 or by overexpression of wild-type β-catenin in J774 cells. Inhibition of β-catenin by either F-TrCP-Ecad or ICG-001 abolished LiCl-induced TOP-flash, but not TGF-β1-induced Smad reporter, activity in J774 cells. These results demonstrate for the first time that β-catenin is required as a co-factor of Smad in TGF-β1-induced EMT of C1.1 epithelial cells, but not in TGF-β1 inhibition of macrophage activation. Targeting β-catenin may dissociate the TGF-β1 profibrotic and anti-inflammatory effects.