Fibrosis, the hallmark of scleroderma, is characterized by excessive synthesis of collagen and extracellular matrix proteins and accumulation of myofibroblasts. Transforming growth factor-beta (TGF-beta), a potent inducer of collagen synthesis, cytokine production, and myofibroblast transdifferentiation, is implicated in fibrosis. Profibrotic TGF-beta responses are induced primarily via the type I activin-like receptor kinase 5 (ALK5) TGF-beta receptor coupled to Smad signal transducers. Here, we investigated the effect of blocking ALK5 function with SM305, a novel small-molecule kinase inhibitor, on fibrotic TGF-beta responses. In normal dermal fibroblasts, SM305 abrogated the ligand-induced phosphorylation, nuclear import, and DNA-binding activity of Smad2/3 and Smad4, and inhibited Smad2/3-dependent transcriptional responses. Furthermore, SM305 blocked TGF-beta-induced extracellular matrix gene expression, cytokine production, and myofibroblast transdifferentiation. In unstimulated scleroderma fibroblasts, SM305 caused a variable and modest reduction in type I collagen levels, and failed to abrogate constitutive nuclear accumulation of Smad2/3, or alter the proportion of smooth muscle actin stress fiber-positive fibroblasts. In vivo, SM305 prevented TGF-beta-induced Smad2/3 phosphorylation type I collagen (COL1)A2 promoter activation in dermal fibroblasts. Taken together, these results indicate that SM305 inhibits intracellular TGF-beta signaling through selective interference with ALK5-mediated Smad activation, resulting in marked suppression of profibrotic responses induced by TGF-beta in vivo and in vitro.