Transforming growth factor-beta (TGF-β) is an important growth inhibitor of epithelial cells, and insensitivity to this cytokine results in uncontrolled cell proliferation and can contribute to tumorigenesis. Smad2 and Smad3 are direct mediators of TGF-β signaling, however little is known about the selective activation of Smad2 versus Smad3. The Smad2 and Smad3 knockout mouse phenotypes and studies comparing Smad2 and Smad3 activation of TGF-β target genes, suggest that Smad2 and Smad3 have distinct roles in TGF-β signaling. The observation that TGF-β inhibits proliferation of Smad3-null mammary gland epithelial cells, whereas Smad3 deficient fibroblasts are only partially growth inhibited, suggests that Smad3 has a different role in epithelial cells and fibroblasts. Herein, the current understanding of Smad2 and Smad3-mediated TGF-β signaling and their relative roles are discussed, in addition to potential mechanisms for the selective activation of Smad2 versus Smad3. Since alterations in the TGF-β signaling pathway play an important role in promoting tumorigenesis and cancer progression, methods for therapeutic targeting of the TGF-β signaling pathway are being pursued. Determining how Smad2 or Smad3 differentially regulate the TGF-β response may translate into developing more effective strategies for cancer therapy. J. Cell. Biochem. 101: 9–33, 2007. © 2007 Wiley-Liss, Inc.