Patients with inflammatory bowel disease (IBD) have an increased risk of developing colorectal cancer due to chronic inflammation. In IBD, chronic inflammation relies upon a TGFβ signaling blockade, but its precise mechanistic relationship to colitis-associated colorectal cancer (CAC) remains unclear. In this study, we investigated the role of the TGFβ signaling inhibitor Smad7 in CAC pathogenesis. In human colonic specimens, Smad7 was downregulated in CD4(+) T cells located in the lamina propria of patients with complicated IBD compared with uncomplicated IBD. Therefore, we assessed CAC susceptibility in a transgenic mouse model where Smad7 was overexpressed specifically in T cells. In this model, Smad7 overexpression increased colitis severity, but the mice nevertheless developed fewer tumors than nontransgenic mice. Protection was associated with increased expression of IFNγ and increased accumulation of cytotoxic CD8(+) and natural killer T cells in the tumors and peritumoral areas. Moreover, genetic deficiency in IFNγ abolished the Smad7-dependent protection against CAC. Taken together, our findings defined a novel and unexpected role for Smad7 in promoting a heightened inflammatory response that protects against CAC.