Smad proteins have recently been shown to be downstream signaling molecules that transduce TGF-beta signals from cell surface to the nucleus. To determine the mechanisms of TGF-beta action in human trophoblast cells, we investigated the expression and regulation of Smad2,3,4, and 7 mRNAs in a normal trophoblast cell line, NPC, and a cell line derived from choriocarcinoma, JEG-3. Messenger RNAs for Smad2,3,4 and 7 were detected in both NPC and JEG-3 cells. TGF-beta1 induced modest increases in Smad2 and Smad4 mRNA levels without affecting Smad3 mRNA expression in both cell lines. Significant increases in Smad7 mRNA levels in both NPC and JEG-3 cells following TGF-beta1 treatment were observed. TGF-beta1 also induced promoter activity of the Smad7 gene, indicating a direct effect at the level of gene transcription. The transcriptional activity of TGF-beta was examined in JEG-3 cells using two TGF-beta responsive reporter constructs, p3TP-Lux and pAR3-Lux. We found that Smad3 and to a lesser extent, Smad2 and Smad4, enhanced, while Smad7 inhibited, TGF-beta1-induced transcriptional activities. The basal and TGF-beta1-induced transcription can be blocked by overexpression of a dominant negative TGF-beta type II receptor. Taken together, these findings demonstrate that in human trophoblast cell lines, the Smad pathway involved in TGF-beta signal transduction is functional and that TGF-beta plays an autocrine role in regulating gene expression.