TGF-beta inhibits adipocyte differentiation, yet is expressed by adipocytes. The function of TGF-beta in adipogenesis, and its mechanism of action, is unknown. To address the role of TGF-beta signaling in adipocyte differentiation, we characterized the expression of the TGF-beta receptors, and the Smads which transmit or inhibit TGF-beta signals, during adipogenesis in 3T3-F442A cells. We found that the cell-surface availability of TGF-beta receptors strongly decreased as adipogenesis proceeds. Whereas mRNA levels for Smads 2, 3, and 4 were unchanged during differentiation, mRNA levels for Smads 6 and 7, which are known to inhibit TGF-beta responses, decreased severely. Dominant negative interference with TGF-beta receptor signaling, by stably expressing a truncated type II TGF-beta receptor, enhanced differentiation and decreased growth. Stable overexpression of Smad2 or Smad3 inhibited differentiation and dominant negative inhibition of Smad3 function, but not Smad2 function, enhanced adipogenesis. Increased Smad6 and Smad7 levels blocked differentiation and enhanced TGF-beta-induced responses. The inhibitory effect of Smad7 on adipocyte differentiation and its cooperation with TGF-beta was associated with the C-domain of Smad7. Our results indicate that endogenous TGF-beta signaling regulates the rate of adipogenesis, and that Smad2 and Smad3 have distinct functions in this endogenous control of differentiation. Smad6 and Smad7 act as negative regulators of adipogenesis and, even though known to inhibit TGF-beta responses, enhance the effects of TGF-beta on these cells.