Signaling by transforming growth factor-beta (TGF-beta), a regulator of several biological processes, including renal fibrosis, is mediated, in part, by the Smad proteins. Tight control of Smad level and activity is critical for proper TGF-beta biological functions. Here, we have investigated the mechanisms involved in regulating Smad3 expression. In human glomerular mesangial cells, Smad3 protein levels were specifically reduced by 24 h of TGF-beta1 treatment, whereas Smad2 and Smad4 levels were not. TGF-beta1 increased endogenous Smad3 ubiquitination, and proteasome inhibitor treatment blocked TGF-beta1-mediated Smad3 down-regulation resulting in accumulation of ubiquitinated Smad3. These data support the concept that Smad3 down-regulation occurs via degradation by the ubiquitin/proteasome machinery. However, changes in Smad3 protein levels were also paralleled by changes in Smad3 mRNA expression. TGF-beta1 did not decrease Smad3 mRNA stability, but it significantly inhibited Smad3 promoter activity. In renal tubular epithelial cells, decreased Smad3 levels were observed only after exposure to TGF-beta1 for longer time periods (5-7 days) that paralleled epithelial-to-mesenchymal transition, as determined by increased expression of smooth muscle alpha-actin and decreased expression of E-cadherin. Decline in Smad3 expression also occurred in kidneys after unilateral ureteral obstruction, a model of tubulointerstitial fibrosis associated with TGF-beta up-regulation and epithelial-to-mesenchymal transition. Our data show for the first time that TGF-beta1 modulates the expression of a receptor-activated Smad at both the protein and transcriptional level. Smad3 down-regulation could represent a feedback loop controlling TGF-beta signaling in a cell phenotype-specific manner.