The regulation of stearoyl-CoA desaturase (SCD), a rate-limiting enzyme in the synthesis of unsaturated fatty acids, is physiologically important because the ratio of saturated to unsaturated fatty acids is thought to control cellular functions by modulating the structural integrity and fluidity of cell membranes. Transforming growth factor-beta (TGF-beta), a multifunctional cytokine, increased SCD mRNA expression in cultured human retinal pigment epithelial cells. This response was elicited by all three TGF-beta isoforms, beta1, beta2, and beta3. However, SCD mRNA expression was not increased either by other members of the TGF-beta family or by other growth factors or cytokines. TGF-beta also increased SCD mRNA expression in several other cell lines tested. The increase in SCD mRNA expression was preceded by a marked increase in Smad2 phosphorylation in TGF-beta-treated human retinal pigment epithelial cells. TGF-beta did not induce SCD mRNA expression in a Smad4-deficient cell line. However, Smad4 overexpression restored the TGF-beta effect in this cell line. Moreover, TGF-beta-induced SCD mRNA expression was effectively blocked by the overexpression of Smad7, an inhibitory Smad. Thus, a TGF-beta signal transduction pathway involving Smad proteins appears to regulate the cellular expression of the SCD gene, and this regulation may play an important role in lipid metabolism.