Transforming growth factor (TGF)-beta and activin A inhibit the growth and induce cell death of parenchymal liver cells. Smad proteins have recently been identified as intracellular signaling mediators and modulators of TGF-beta family members. This study assessed the role of Smad proteins during the action of TGF-beta and activin A on liver cells using a well-differentiated human hepatoma cell line, Hep3B cells. To study the role of Smad proteins in the anti-proliferative, apoptosis-inducing, activities of TGF-beta and activin A in liver cells, we stably transfected dominant negative Smad2-3SA or Smad3-3SA mutants in Hep3B cells. Transfection of Smad2-3SA or Smad3-3SA abrogated both TGF-beta-induced and activin A-induced growth inhibition and apoptosis of Hep3B cells. Down regulation of Bcl-xL expression by TGF-beta was both Smad2 and Smad3 dependent. We also demonstrate that transfection of Smad7, an intracellular antagonist of Smad signaling, inhibited both TGF-beta- and activin A-induced apoptosis and growth inhibition of these cells. These results suggest that Smad proteins positively and negatively mediate TGF-beta-induced and activin A-induced apoptosis and growth inhibition of liver cells.