The Transforming Growth Factor-Beta (TGF-β) family is involved in regulating a variety of cellular processes such as apoptosis, differentiation, and proliferation. TGF-β binding to a Serine/Threonine kinase receptor complex causes the recruitment and subsequent activation of transcription factors known as smad2 and smad3. These proteins subsequently translocate into the nucleus to negatively or positively regulate gene expression. In this study, we define a second signaling pathway leading to TGF-β receptor activation of Extracellular Signal Regulated Kinase (Erk) in a cell-type dependent manner. TGF-β induced Erk activation was found in phenotypically normal mesenchymal cells, but not normal epithelial cells. By activating phosphotidylinositol 3-kinase (PI3K), TGF-β stimulates p21-activated kinase2 (Pak2) to phosphorylate c-Raf, ultimately resulting in Erk activation. Activation of Erk was necessary for TGF-β induced fibroblast replication. In addition, Erk phosphorylated the linker region of nuclear localized smads, resulting in increased half-life of C-terminal phospho-smad 2 and 3 and increased duration of smad target gene transcription. Together, these data show that in mesenchymal cell types the TGF-β/PI3K/Pak2/Raf/MEK/Erk pathway regulates smad signaling, is critical for TGF-β-induced growth and is part of an integrated signaling web containing multiple interacting pathways rather than discrete smad/non-smad pathways.