Smad proteins play a key role in the intracellular signaling of the transforming growth factor β (TGF-β) superfamily of extracellular polypeptides that initiate signaling to regulate a wide variety of biological processes. The inhibitory Smad, Smad7, has been shown to function as intracellular antagonists of TGF-β family signaling and is upregulated in several cancers. To determine the effect of Smad7-mediated blockade of TGF-β signaling, we have stably expressed Smad7 in a TGF-β-sensitive, well-differentiated, and non-tumorigenic cell line, FET, that was derived from human colon adenocarcinoma. Smad7 inhibits TGF-β-induced transcriptional responses by blocking complex formation between Smad 2/3 and Smad4. While Smad7 has no effect on TGF-β-induced activation of p38 MAPK and ERK, it blocks the phosphorylation of Akt by TGF-β and enhances TGF-β-induced phosphorylation of c-Jun. FET cells expressing Smad7 show anchorage-independent growth and enhance tumorigenicity in athymic nude mice. Smad7 blocks TGF-β-induced growth inhibition by preventing TGF-β-induced G1 arrest. Smad7 inhibits TGF-β-mediated downregulation of c-Myc, CDK4, and Cyclin D1, and suppresses the expression of p21Cip1. As a result, Smad7 inhibits TGF-β-mediated downregulation of Rb phosphorylation. Furthermore, Smad7 inhibits the apoptosis of these cells. Together, Smad7 may increase the tumorigenicity of FET cells by blocking TGF-β-induced growth inhibition and by inhibiting apoptosis. Thus, this study provides a mechanism by which a portion of human colorectal tumors may become refractory to tumor-suppressive actions of TGF-β that might result in increased tumorigenicity. © 2005 Elsevier Inc. All rights reserved.