Transforming growth factor-beta (TGF-beta)-induced alpha-smooth muscle actin (ASMA) expression is a key indicator of myofibroblast differentiation from fibroblasts. Recent studies suggest that a TGF-beta control element is important in the regulation of the ASMA gene promoter by TGF-beta. In this study, the role of Smad3, a key component of the Smad pathway that mediates TGF-beta signaling in regulation of ASMA gene expression, is investigated. All members of the Smad family were expressed in rat lung fibroblasts, and Smad3 expression was elevated upon TGF-beta 1 treatment. Transfection with a Smad3-expressing plasmid markedly increased Smad3 and ASMA protein expression, whereas transfection with an antisense Smad3 plasmid suppressed Smad3 and ASMA expression. Similar effects were noted when the cloned rat ASMA promoter-luciferase reporter gene construct was used to monitor transcriptional activation of the ASMA gene. Electrophoretic mobility shift assays and DNA affinity precipitation indicated Smad3 binding to at least two regions of the promoter containing CAGA motifs, termed Smad3-binding elements (SBEs). Mutation of one of the SBEs decreased promoter activity significantly, indicative of a functional role for this SBE. Taken together, these findings suggest a role for Smad3 in TGF-beta regulation of ASMA gene expression in myofibroblast differentiation.