Transforming growth factor-beta (TGF-beta) potently inhibits cell cycle progression at the G1 phase. Smad3 has a key function in mediating the TGF-beta growth-inhibitory response. Here we show that Smad3 is a major physiological substrate of the G1 cyclin-dependent kinases CDK4 and CDK2. Except for the retinoblastoma protein family, Smad3 is the only CDK4 substrate demonstrated so far. We have mapped CDK4 and CDK2 phosphorylation sites to Thr 8, Thr 178 and Ser 212 in Smad3. Mutation of the CDK phosphorylation sites increases Smad3 transcriptional activity, leading to higher expression of the CDK inhibitor p15. Mutation of the CDK phosphorylation sites of Smad3 also increases its ability to downregulate the expression of c-myc. Using Smad3(-/-) mouse embryonic fibroblasts and other epithelial cell lines, we further show that Smad3 inhibits cell cycle progression from G1 to S phase and that mutation of the CDK phosphorylation sites in Smad3 increases this ability. Taken together, these findings indicate that CDK phosphorylation of Smad3 inhibits its transcriptional activity and antiproliferative function. Because cancer cells often contain high levels of CDK activity, diminishing Smad3 activity by CDK phosphorylation may contribute to tumorigenesis and TGF-beta resistance in cancers.