Transforming growth factor β (TGF-β) initiates signaling through heteromeric complexes of transmembrane type I and type II serine/threonine kinase receptors. Activated TGF-β type I receptor phosphorylates receptor-regulated Smads (2 and 3). Antagonistic Smad 7 forms stable association with the activated TGF-β type I receptor, blocking phosphorylation of receptor-regulated Smads. On the other hand, elevated serum concentration of TGF-β along with resistance to its growth-inhibitory effect is commonly observed in human hepatocellular carcinoma (HCC) patients. In this study, we investigated the mechanisms of resistance to tumor-derived TGF-β in human HCC and hepatoblastoma-derived cell lines, focusing on the roles of receptor-regulated Smads and antagonistic Smad 7. HuH-7 and HepG2 cells showed poor response to TGF-β–mediated growth inhibition. Because neutralization of TGF-β in the medium or blockage of signal transduction pathway by inductions of dominant negative Smad 2/3 resulted in a stimulation of cell growth, tumor-derived TGF-β signal acts on cell growth negatively. However, Smad 7 induced by TGF-β negatively regulated Smad 2 action and rendered most Smad 2 proteins in the cytoplasm. Taken together, these results indicate that endogenous TGF-β–mediated induction of Smad 7 results in a higher “threshold” for the antiproliferative signals mediated by receptor-regulated Smads, and can be involved in reduced responsiveness to the cytokine in some human HCC cells.