The proto-oncogene Sno has been shown to be a negative regulator of transforming growth factor beta (TGF-beta) signaling in vitro, using overexpression and artificial reporter systems. To examine Sno function in vivo, we made two targeted deletions at the Sno locus: a 5' deletion, with reduced Sno protein (hypomorph), and an exon 1 deletion removing half the protein coding sequence, in which Sno protein is undetectable in homozygotes (null). Homozygous Sno hypomorph and null mutant mice are viable without gross developmental defects. We found that Sno mRNA is constitutively expressed in normal thymocytes and splenic T cells, with increased expression 1 h following T-cell receptor ligation. Although thymocyte and splenic T-cell populations appeared normal in mutant mice, T-cell proliferation in response to activating stimuli was defective in both mutant strains. This defect could be reversed by incubation with either anti-TGF-beta antibodies or exogenous interleukin-2 (IL-2). Together, these findings suggest that Sno-dependent suppression of TGF-beta signaling is required for upregulation of growth factor production and normal T-cell proliferation following receptor ligation. Indeed, both IL-2 and IL-4 levels are reduced in response to anti-CD3 epsilon stimulation of mutant T cells, and transfected Sno activated an IL-2 reporter system in non-T cells. Mutant mouse embryo fibroblasts also exhibited a reduced cell proliferation rate that could be reversed by administration of anti-TGF-beta. Our data provide strong evidence that Sno is a significant negative regulator of antiproliferative TGF-beta signaling in both T cells and other cell types in vivo.