TGF-β signaling in liver cells has variant roles in the dynamics of liver diseases, including hepatocellular carcinoma (HCC). We previously found a correlation of high levels of the important endogenous negative TGF-β signaling regulator SMAD7 with better clinical outcome in HCC patients. However, the underlying tumor-suppressive molecular mechanisms are still unclear. Here, we show that conditional (TTR-Cre) hepatocyte-specific SMAD7 knockout (KO) mice develop more tumors than wild-type and corresponding SMAD7 transgenic mice 9 months after diethylnitrosamine (DEN) challenge, verifying SMAD7 as a tumor suppressor in HCC. In line with our findings in patients, Smad7 levels in both tumor tissue as well as surrounding tissue show a significant inverse correlation with tumor numbers. SMAD7 KO mice presented with increased pSMAD2/3 levels and decreased apoptosis in the tumor tissue. Higher tumor incidence was accompanied by reduced P21 and upregulated c-MYC expression in the tumors. Activation of signal transducer and activator of transcription factor 3 signaling was found in Smad7-deficient mouse tumors and in patients with low tumoral SMAD7 expression as compared with surrounding tissue. Together, our results provide new mechanistic insights into the tumor-suppressive functions of SMAD7 in hepatocarcinogenesis.