LIM-only protein 4 (LMO4) plays critical roles in mammalian development, and has been proposed to play roles in epithelial oncogenesis, including breast cancer. As LMO4 is highly expressed in the epithelial compartments at locations of active mesenchymal-epithelial interactions, we reasoned that LMO4 might act by modulating signaling pathways involved in mesenchymal-epithelial signaling. One such candidate signal is the transforming growth factor-beta (TGFbeta) cytokine pathway, which plays important roles both in development and cancer. We show here that the transcriptional response to TGFbeta in epithelial cells is sensitive to LMO4 levels; both up- and downregulation of LMO4 can enhance TGFbeta signaling as assessed by a TGFbeta-responsive reporter gene. Furthermore, LMO4 can interact with the MH1 and linker domains of receptor-mediated Smad proteins, and associate with the endogenous TGFbeta-responsive Plasminogen Activator Inhibitor-1 gene promoter in a TGFbeta-dependent manner, suggesting that such interactions may mediate the effects of LMO4 on TGFbeta signaling. When introduced into mammary epithelial cells, LMO4 potentiated the growth-inhibitory effects of TGFbeta in those cells. These results define a new function for LMO4 as a coactivator in TGFbeta signaling, and provide a potential novel mechanism for LMO4-mediated regulation in development and oncogenesis.