The transforming growth factor-beta1 (TGF-beta1) is a cytokine involved in many biological events inlcuding immunosuppression, angiogenesis, cell growth, and apoptosis. Expression of TGF-beta1 at the transcriptional level is controlled by a series of ubiquitous and specialized factors whose activities can be modulated by a variety of signaling events. Here we demonstrate that activity of the TGF-beta1 promoter is increased by C/EBPbeta, a DNA-binding transcription factor whose activity can be influenced by several immunomodulators, in astrocytes and microglial cells. Interestingly, expression of Smad3 and Smad4, the downstream regulators of the TGF-beta1-signaling pathway, impairs the activity of C/EBPbeta on the TGF-beta1 promoter. Further, we demonstrate that MH2, a common domain among Smads that has protein-binding activities, interacts with C/EBPbeta and decreases its association with a region of the TGF-beta1 promoter that is responsive to C/EBPbeta activation. Interestingly, the p65 subunit of nuclear factor-kappaB (NF-kappaB), which also interacts with C/EBPbeta, cooperates with MH2 and decreased DNA-binding and transcriptional activities of C/EBPbeta on the TGF-beta1 promoter. These observations indicate that an autoregulatory mechanism, involving the MH2 domain of Smads, modulates activation of the TGF-beta1 promoter by C/EBPbeta. Further, our results show that the interplay between NF-kappaB and C/EBPbeta has an impact on the ability of C/EBPbeta to stimulate TGF-beta1 transcription, hence, suggesting that the cross-communication of signaling pathways that modulate NF-kappaB and C/EBPbeta may dictate the level of TGF-beta1 promoter activity.