After hepatitis virus infection, plasma transforming growth factor (TGF)-β increases in either the acute or chronic inflammatory microenvironment. Although TGF-β is upregulated in patients with hepatocellular carcinoma, it is one of the most potent growth inhibitors for hepatocytes. This cytokine also upregulates extracellular matrix (ECM) production of hepatic stellate cells. Therefore, TGF-β is considered to be the major factor regulating liver carcinogenesis and accelerating liver fibrosis. Smad2 and Smad3 act as the intracellular mediators of TGF-β signal transduction pathway. We have generated numerous antibodies against individual phosphorylation sites in Smad2/3, and identified 3 types of phosphorylated forms (phospho-isoforms): COOH-terminally phosphorylated Smad2/3 (pSmad2C and pSmad3C), linker phosphorylated Smad2/3 (pSmad2L and pSmad3L) and dually phosphorylated Smad2/3 (pSmad2L/C and pSmad3L/C). These Smad phospho-isoforms are categorized into 3 groups: cytostatic pSmad3C signaling, mitogenic pSmad3L signaling and invasive/fibrogenic pSmad2L/C signaling. In this review, we describe differential regulation of TGF-β/Smad signaling after acute or chronic liver injuries. In addition, we consider how chronic inflammation associated with hepatitis virus infection promotes hepatic fibrosis and carcinogenesis (fibro-carcinogenesis), focusing on alteration of Smad phospho-isoform signaling. Finally, we show reversibility of Smad phospho-isoform signaling after therapy against hepatitis virus infection.