Cross talk between transforming growth factor b(TGF-b) serine/threonine kinase receptor signaling and tyrosine kinase receptor signaling modulates cell responsiveness to polypeptide growth factors regulating cell proliferation, differentiation, and apoptosis. Here we provide a mechanism through which Smad-dependent TGF-b signaling is modulated by protein kinase C (PKC). PKC, for example, is activated downstream of tyrosine kinase receptors. We show that PKC directly phosphorylates receptor-regulated Smad proteins. This phosphorylation abrogates the ability of Smad3 to bind directly to DNA, which leads to subsequent inability to mediate transcriptional responses dependent on the direct binding of Smad3 to DNA. Interference with PKC regulation of Smad functions increased cell sensitivity to transformation by the tumor promoter phorbol 12-myristate 13-acetate (PMA). PKC-dependent phosphorylation of Smad3 was found also to be a key event in the PMA-dependent inactivation of TGF-b-stimulated cell death. Thus, PKC-dependent phosphorylation of Smad3 leads to down-regulation of the growth inhibitory and apoptotic action of TGF-b.