Upon activation, TGF-β type I receptor (TβRI) undergoes active ubiquitination via recruitment of E3 ligases to the receptor complex by Smad7. However, how ubiquitination of TβRI is coupled to intracellular trafficking, and protein degradation remains unclear. We report here that Tollip, an adaptor protein that contains both ubiquitin-associated domains and endosome-targeting domain, plays an important role in modulating trafficking and degradation of TβRI. Tollip was previously demonstrated to possess a functional role in modulating the signaling of interleukin-1 and Toll-like receptors. We identify here that Tollip interacts with Smad7, a major modulatory protein involved in the negative regulation of TGF-β signaling. Overexpression of Tollip antagonizes TGF-β-stimulated transcriptional response, Smad2 phosphorylation, and epithelial-mesenchymal transition. Tollip also interacts with ubiquitinated TβRI, and such interaction requires ubiquitin-associated domains of Tollip. The interaction and intracellular colocalization of Tollip with TβRI is enhanced by Smad7. Overexpression of Tollip accelerates protein degradation of activated TβRI. In addition, Tollip alters subcellular compartmentalization and endosomal trafficking of activated TβRI. Collectively, our studies reveal that Tollip cooperates with Smad7 to modulate intracellular trafficking and degradation of ubiquitinated TβRI, whereby negatively regulates TGF-β signaling pathway.