We have shown previously that the transforming growth factor-beta (TGFbeta)-regulated Sma-Mad (Smad) protein 3 and Smad4 proteins transactivate the apolipoprotein C-III promoter in hepatic cells via a hormone response element that binds the nuclear receptor hepatocyte nuclear factor 4 (HNF-4). In the present study, we show that Smad3 and Smad4 but not Smad2 physically interact with HNF-4 via their Mad homology 1 domains both in vitro and in vivo. The synergistic transactivation of target promoters by Smads and HNF-4 was shown to depend on the specific promoter context and did not require an intact beta-hairpin/DNA binding domain of the Smads. Using glutathione S-transferase interaction assays, we established that two regions of HNF-4, the N-terminal activation function 1 (AF-1) domain (aa 1-24) and the C-terminal F domain (aa 388-455) can mediate physical Smad3/HNF-4 interactions in vitro. In vivo, Smad3 and Smad4 proteins enhanced the transactivation function of various GAL4-HNF-4 fusion proteins via the AF-1 and the adjacent DNA binding domain, whereas a single tyrosine to alanine substitution in AF-1 abolished coactivation by Smads. The findings suggest that the transcriptional cross talk between the TGFbeta-regulated Smads and HNF-4 is mediated by specific functional domains in the two types of transcription factors. Furthermore, the specificity of this interaction for certain target promoters may play an important role in various hepatocyte functions, which are regulated by TGFbeta and the Smads.