Understanding the molecular mechanisms underlying the antagonistic activities of tumor necrosis factor-alpha (TNF-alpha) against transforming growth factor-beta (TGF-beta) is of utmost importance given the physiopathological implications of these cytokines. In this report, we demonstrate that TNF-alpha prevents TGF-beta-induced Smad-specific gene transactivation without inducing detectable levels of inhibitory Smad7 in human dermal fibroblasts. On the other hand, c-Jun and JunB, both induced by TNF-alpha, block Smad3-mediated transcription. Expression of antisense c-Jun mRNA prevents TNF-alpha inhibition of TGF-beta/Smad signaling whereas that of dominant-negative Ikappa-B kinase-alpha or antisense Smad7 does not. We provide evidence for off-DNA interactions between Smad3 and both c-Jun and JunB accompanied with reduced Smad3-DNA interactions. Finally, we show that overexpression of the transcriptional co-activator p300 prevents TNF-alpha/AP-1 inhibition of TGF-beta/Smad signaling. These data suggest that TNF-alpha interferes with Smad signaling through the induction of AP-1 components, the latter forming off-DNA complexes with Smad3 and preventing its binding to specific cis-element(s). In addition, Jun members compete with Smad3 for the common transcription co-activator p300. These two mechanisms are likely to act in concert to decrease Smad-specific transcription.