Smad7 is an inhibitory molecule induced by members of the transforming growth factor-β (TGF-β) family, including TGF-β, activin, nodal and bone morphogenetic proteins (BMPs). To elucidate the in vivo functions of Smad7, we generated conditional Smad7-knockout mice in which the Mad homology 2 (MH2) domain and the poly (A) signal sequence were flanked with loxP sites (floxed). The Smad7-floxed mice exhibited no obvious phenotype. Smad7 total-null mice on a C57BL/6 background died within a few days of birth, whereas mice with an ICR background developed to adulthood but were significantly smaller than wild-type mice. Unexpectedly, phospho-Smad2 and phospho-Smad3 were decreased in Smad7-deficient mouse embryonic fibroblast (MEF) cells, whereas phospho-Smad1/5/8 was similarly expressed in wild-type and Smad7-deficient MEF cells. Moreover, expression levels of TGF-β type I receptor (ALK5) were higher in Smad7-deficient MEF cells than in wild-type MEF cells. Plasminogen activator inhibitor-1 (PAI-1) and inhibitor of differentiation-1 (Id-1) mRNA were similarly expressed in wild-type and Smad7-deficient MEF cells. Some differences were observed in mitogen-activated protein kinase (MAPK)-signalling between wild-type and Smad7-deficient MEF cells. We demonstrated that Smad7 plays an important role in normal mouse growth and provide a useful tool for analysing Smad7 functions in vivo.