Tsc-22 was isolated as a TGF-beta-inducible gene by differential screening of the mouse osteoblastic cell cDNA library [J Biol Chem 267 (1992) 10219]. tsc-22 mRNA is expressed in almost all organs of mice and humans and its expression is induced in a variety of cell lines by many different factors including TGF-beta, phorbol ester, serum, and progestin. tsc-22 encodes a 18-kd protein that contains a leucine zipper motif and a Tsc-box. The leucine zipper motif of the Tsc-22 protein does not have a basic DNA binding motif and when the protein was fused to a heterologous DNA binding domain, it showed various transcription-modulating activities ranging from activation to repression [J Biol Chem 274 (1999) 27439, Biochem Biophys Res Commun 278 (2000) 659]. Although these results suggest that the Tsc-22 protein functions as a transcriptional regulator recruiting various coactivators or repressors, its mechanism is not known. In this study, we examined whether Tsc-22 modulates the TGF-beta-dependant signaling pathway and found that Tsc-22 binds to and modulate the transcriptional activity of Smad3 and Smad4. Its effect on cellular differentiation was also examined.