Recent large clinical trials indicate that angiotensin-converting enzyme inhibitors (ACE-I) attenuate the detrimental outcome of progressive renal disease. The hemoregulatory tetrapeptide N-acetyl-seryl-aspartyl-lysyl-proline (Ac-SDKP, AcSDKP) is hydrolyzed by ACE, and plasma Ac-SDKP level is increased by fivefold after treatment with ACE-I. Ac-SDKP was found to ameliorate cardiac and renal fibrosis in hypertensive animal models. However, the molecular mechanisms by which Ac-SDKP mediates anti-fibrotic effects remain unclear. This study is an examination of the interaction between Ac-SDKP and transforming growth factor-beta (TGF-beta), one of the key cytokines in the progression of renal disease, in human mesangial cells. Ac-SDKP inhibited TGF-beta1-induced plasminogen activator inhibitor-1 (PAI-1) and alpha2 (I) collagen mRNA. Ac-SDKP suppressed not only TGF-beta1-induced Smad2 phosphorylation at Ser-465/467 in a dose-dependent manner, but also the nuclear accumulation of receptor-regulated Smads (R-Smad), Smad2 and Smad3. As expected, Ac-SDKP inhibited TGF-beta-responsive Smad-dependent luciferase reporters, 3TP-luc and 4xSBE-luc. Immunofluorescence analysis revealed that the inhibitory Smad, Smad7, was exported to the cytoplasm from the nucleus by the treatment with Ac-SDKP. These findings provide novel evidence that Ac-SDKP inhibits TGF-beta signal transduction through the suppression of R-Smad activation via nuclear export of Smad7, highlighting an alternative mechanism involved in the reno-protective efficacy of ACE-I.