Transforming growth factor-beta (TGF-beta) signaling is dependent on the heterodimerization of the type II TGF-beta receptor (TbetaRII) with the type I TGF-beta receptor (TbetaRI). Activated TbetaRI then mediates TGF-beta signals by inducing the phosphorylation of Smad2 and/or Smad3, which separately hetetorodimerize with Smad4 and translocate to the nucleus. Phosphorylation of Smad2/Smad3 by activated TbetaRI is inhibited by two newly discovered members of the Smad family, Smad6 and Smad7. We now report that Smad7 mRNA levels are increased in human pancreatic cancer by comparison with the normal pancreas, and that by in situ hybridization, Smad7 is over-expressed in the cancer cells within the tumor mass. Stable transfection of COLO-357 human pancreatic cancer cells with a full-length Smad7 construct leads to complete loss of the growth inhibitory response to TGF-beta1, without altering TGF-beta1-mediated induction of PAI-I. Furthermore, Smad7 transfected COLO-357 cells display enhanced anchorage-independent growth and accelerated growth in nude mice. These findings point to a previously unrecognized mechanism for selective suppression of TGF-beta-mediated growth inhibition in cancer cells that allows for continued activation of the PAI-I promoter by TGF-beta1, which may act to enhance the tumorigenicity of certain cancer cells.