Transforming growth factor-beta (TGFbeta) is a key mediator of extracellular matrix (ECM) accumulation in sclerotic kidney diseases such as diabetic nephropathy. One of the main target cells for TGFbeta in the kidney are glomerular mesangial cells, which respond by increasing expression of ECM proteins, such as collagens, laminin and fibronectin, while suppressing the expression of ECM-degrading proteases and increasing the synthesis of ECM protease inhibitors, including plasminogen activator inhibitor-1. Previous studies have shown that exposure of mesangial cells to chronic high-glucose conditions, such as those seen in diabetes, increases ECM deposition in a mechanism involving glucose-mediated up-regulation of TGFbeta expression. Naturally occurring inhibitors of this TGFbeta-dependent fibrotic response include decorin, a small leucine-rich proteoglycan. While the mechanism by which TGFbeta stimulates gene expression via the Smad signal-transduction pathway is becoming clear, the precise mechanism by which decorin may impinge upon TGFbeta activity remains to be established. In this study, for the first time we provide evidence that decorin can disrupt glucose- and TGFbeta/Smad-dependent transcriptional events in human mesangial cells through a mechanism that involves an increase in Ca(2+) signalling, the activation of Ca(2+)/calmodulin-dependent protein kinase II and ensuing phosphorylation of Smad2 at Ser-240. We show that decorin also induces Ser-240 phospho-Smad hetero-oligomerization with Smad4 and the nuclear localization of this complex independently of TGFbeta receptor activation. Thus, in human mesangial cells, the mechanism of decorin-mediated inhibition of TGFbeta signalling may involve activation of Ca(2+) signalling, the subsequent phosphorylation of Smad2 at a key regulatory site, and the sequestration of Smad4 in the nucleus.