A yeast two‐hybrid screen was utilized to identify novel Smad 3 binding proteins expressed in developing mouse orofacial tissue. Three proteins (Erbin, Par‐3, and Dishevelled) were identified that share several similar structural and functional characteristics. Each contains at least one PDZ domain and all have been demonstrated to play a role in the establishment and maintenance of cell polarity. In GST (glutathione S‐transferase) pull‐down assays, Erbin, Par‐3, and Dishevelled bound strongly to the isolated MH2 domain of Smad 3, with weaker binding to a full‐length Smad 3 protein. Failure of Erbin, Par‐3, and Dishevelled to bind to a Smad 3 mutant protein that was missing the MH2 domain confirms that the binding site resides within the MH2 domain. Erbin, Par‐3, and Dishevelled also interacted with the MH2 domains of other Smads, suggesting broad Smad binding specificity. Dishevelled and Erbin mutant proteins, in which the PDZ domain was removed, still retained their ability to bind Smad 3, albeit with lower affinity. While transforming growth factor β (TGFβ) has been suggested to alter cell polarity through a Smad‐independent mechanism involving activation of members of the RhoA family of GTP binding proteins, the observation that Smads can directly interact with proteins involved in cell polarity, as shown in the present report, suggests an additional means by which TGFβ could alter cell polarity via a Smad‐dependent signaling mechanism.