Smad family members are essential intracellular signaling components of the transforming growth factor-beta (TGF-beta) superfamily involved in a range of biological activities. The loss of sensitivity to TGF-beta is frequent in human lung cancers and inactivation of Smad family members are thought to play important roles in disruption of TGF-beta signaling. In the study presented here, we characterized the biological and biochemical functions of six Smad2 and Smad4 mutants, which we previously identified in human lung cancers. All mutant Smad2 and Smad4 were in fact found to be defective in transmitting growth inhibitory signals originating from TGF-beta and incapable of activating Smad/hFAST-1-mediated transcription. Transcriptional activation of plasminogen activator inhibitor type 1 (PAI-1) was impaired in four of the six mutants due to the defects in homo- and/or hetero-oligomerization with wild-type Smads. In contrast, the remaining two Smad mutants showed a modest reduction in the PAI-1 transcriptional activation and apparently retained the ability to oligomerize with wild-type Smads. Significant loss of growth inhibition and Smad/hFAST-1-mediated transcriptional activation by all of the six mutants suggested that Smad mutants are indeed functionally impaired Smad mutations and may play a role in lung tumorigenesis. Moreover, the present findings suggest that in addition to the impairment in the homo- and/or hetero-oligomerization, there may be an alternative mechanism producing disruption of TGF-beta signaling, involving hFAST-1-or possibly other transcriptional cofactor(s)-mediated transcriptional activation.