Increasing evidence shows that transforming growth factor-beta TGF-beta1 (TGF-beta1) is upregulated and plays a diverse role in renal fibrosis by stimulating extracellular matrix (ECM) production, while inhibiting renal inflammation. Recent studies have identified that TGF-beta1, once activated, signals through its downstream signaling pathway to exert its biological effects. It is now well accepted that TGF-beta regulates fibrosis positively by receptor-associated Smads including Smad2 and Smad3, but negatively by an inhibitory Smad, called Smad7. We and other investigators have shown that gene transfer of Smad7 is able to inhibit renal fibrosis in a number of experimental models of chronic kidney diseases, including obstructive nephropathy, remnant kidney disease, and autoimmune crescentic glomerulonephritis. Blockade of Smad2/3 activation is a major mechanism by which overexpression of Smad7 inhibits renal scarring. Furthermore, our recent findings also demonstrate that Smad7 plays a critical role in anti-inflammation in chronic kidney diseases by blocking the NF.kappaB-dependent inflammatory pathway. Thus, Smad7 has a unique role in both anti-renal fibrosis and inflammation. These findings also indicate that targeting the TGF-beta/Smad signaling pathway by overexpressing Smad7 may provide a novel, specific, and effective therapy for chronic kidney diseases.