Central in the pathogenesis of glucocorticoid (GC)-induced osteoporosis is the effects of GC on bone formation. However, the mechanism of GC-inhibited bone formation is not well known. Transforming growth factor (TGF)-beta is most abundant in bone matrix compared with other tissues, and we have recently proposed that Smad3, a TGF-beta signaling molecule, is important for promoting bone formation. However, no reports have been available about the effects of GC on Smad3 in osteoblasts. In the present study, we investigated whether dexamethasone (Dex), an active GC analog, would affect the expression and activity of Smad3 in mouse osteoblastic MC3T3-E1 and rat osteoblastic UMR-106 cells. Dex significantly suppressed Smad3-stimulated alkaline phosphatase (ALP) activity, although it did not affect TGF-beta-inhibited ALP activity in MC3T3-E1 cells. Moreover, pretreatment with Dex suppressed TGF-beta-enhanced expression of type I collagen in MC3T3-E1 and UMR-106 cells. In the luciferase assay using p3TP-Lux with a Smad3-specific response element, Dex significantly suppressed the transcriptional activity induced by TGF-beta as well as Smad3. However, Dex did not affect the expression of Smad3 in these cells at both mRNA and protein levels. In conclusion, the present study indicates that Dex inhibits ALP activity and type I collagen expression, presumably by suppressing Smad3-induced transcriptional activity but not by modulating Smad3 expression in osteoblastic cells.