Halofuginone is a drug that has been shown to have an antifibrotic property in vitro and in vivo. Whereas halofuginone shows promise as a therapeutic agent for a variety of diseases including scleroderma, liver cirrhosis, cystic fibrosis, and certain types of cancer, the mechanism of action remains unknown. Using the tight skin mouse (TSK) model for scleroderma, we evaluated the ability of halofuginone to inhibit spontaneous development of dermal fibrosis. We found that administration of a low dose of halofuginone both in adult and newborn animals for 60 d prevented the development of cutaneous hyperplasia (dermal fibrosis). In vitro halofuginone was found to reduce the amount of collagen synthesized by fibroblasts. This effect was due to a reduction in the promoter activity of the type-I collagen genes as treatment of fibroblast cultures with 10(-8) M halofuginone reduced the level of alpha2(I) collagen message detectible by northern blot and greatly reduced the activity of a reporter construct under control of the -3200 to +54 bp alpha2(I) collagen promoter. In addition, analysis of transforming growth factor beta signaling pathways in fibroblasts revealed that halofuginone inhibited transforming-growth-factor-beta-induced upregulation of collagen protein and activity of the alpha2(I) collagen promoter. Further we found that halofuginone blocked the phosphorylation and subsequent activation of Smad3 after transforming growth factor beta stimulation. Apparently the inhibitory property was specific to Smad3 as there was no inhibitory effect on the activation of Smad2 after stimulation with transforming growth factor beta. Our results demonstrate that halofuginone is a specific inhibitor of type-I collagen synthesis and may elicit its effect via interference with the transforming growth factor beta signaling pathway.