Intrauterine growth restriction is associated with impaired lung function in adulthood. It is unknown whether such impairment of lung function is linked to the transforming growth factor (TGF)-β system in the lung. Therefore, we investigated the effects of IUGR on lung function, expression of extracellular matrix (ECM) components and TGF-β signaling in rats. IUGR was induced in rats by isocaloric protein restriction during gestation. Lung function was assessed with direct plethysmography at postnatal day (P) 70. Pulmonary activity of the TGF-β system was determined at P1 and P70. TGF-β signaling was blocked in vitro using adenovirus-delivered Smad7. At P70, respiratory airway compliance was significantly impaired after IUGR. These changes were accompanied by decreased expression of TGF-β1 at P1 and P70 and a consistently dampened phosphorylation of Smad2 and Smad3. Furthermore, the mRNA expression levels of inhibitors of TGF-β signaling (Smad7 and Smurf2) were reduced, and the expression of TGF-β-regulated ECM components (e.g. collagen I) was decreased in the lungs of IUGR animals at P1; whereas elastin and tenascin N expression was significantly upregulated. In vitro inhibition of TGF-β signaling in NIH/3T3, MLE 12 and endothelial cells by adenovirus-delivered Smad7 demonstrated a direct effect on the expression of ECM components. Taken together, these data demonstrate a significant impact of IUGR on lung development and function and suggest that attenuated TGF-β signaling may contribute to the pathological processes of IUGR-associated lung disease.