The transforming growth factor-beta (TGF-beta) family of secreted proteins have pleiotropic functions that are critical to normal development and homeostasis. However, the intracellular mechanisms by which the TGF-beta proteins elicit cellular responses remain incompletely understood. The Smad proteins provide a major means for the propagation of the TGF-beta signal from the cell surface to the nucleus, where the Smad proteins regulate gene expression leading to TGF-beta-dependent cellular responses including the inhibition of cell proliferation. Recent studies have suggested that a nuclear Smad-interacting protein termed SnoN, when overexpressed in cells, suppresses TGF-beta-induced Smad signaling and TGF-beta inhibition of cell proliferation. However, the physiologic function of endogenous SnoN in TGF-beta-mediated biological responses remained to be elucidated. Here, we determined the effect of genetic knock-down of SnoN by RNA interference on TGF-beta responses in mammalian cells. Unexpectedly, we found that SnoN knock-down specifically inhibited TGF-beta-induced transcription in the lung epithelial cell line Mv1Lu but not in HeLa or HaCaT cells. SnoN knock-down was also found to block TGF-beta-dependent cell cycle arrest in Mv1Lu cells. Collectively, these data indicate that rather than suppressing TGF-beta-induced responses, endogenous SnoN acts as a positive mediator of TGF-beta-induced transcription and cell cycle arrest in lung epithelial cells. Our study also shows that SnoN couples the TGF-beta signal to gene expression in a cell-specific manner.