Thyroid hormone is a critical mediator of cellular metabolism and differentiation. Precise tissue-specific regulation of the concentration of the active ligand, T(3), is achieved by iodothyronine monodeiodination. Type 3 iodothyronine deiodinase (D3) is the major inactivating pathway, preventing activation of the prohormone T(4) and terminating the action of T(3). Using nontransformed human cells, we show that TGF-beta stimulates transcription of the hDio3 gene via a Smad-dependent pathway. Combinations of Smad2 or Smad3 with Smad4 stimulate hDio3 gene transcription only in cells that express endogenous D3 activity, indicating that Smads are necessary but not sufficient for D3 induction. TGF-beta induces endogenous D3 in diverse human cell types, including fetal and adult fibroblasts from several tissues, hemangioma cells, fetal epithelia, and skeletal muscle myoblasts. Maximum stimulation of D3 by TGF-beta also requires MAPK and is synergistic with phorbol ester and several mitogens known to signal through transmembrane receptor tyrosine kinases but not with estradiol. These data reveal a previously unrecognized interaction between two pluripotent systems, TGF-beta and thyroid hormone, both of which have major roles in the regulation of cell growth and differentiation.