Transforming growth factor (TGF) β is abundantly stored in bone matrix and appears to regulate bone metabolism. Although the Smad family proteins are critical components of the TGF-β signaling pathways, the roles of Smad3 in the expression of osteoblastic phenotypes remain poorly understood. Therefore, this study was performed to clarify the roles of Smad3 in the regulation of proliferation, expression of bone matrix proteins, and mineralization in osteoblasts by using mouse osteoblastic cell line MC3T3-E1 cells stably transfected with Smad3. Smad3 significantly inhibited [3H]thymidine incorporation and fluorescent intensity of the MTT-dye assay, compared with empty vector. Moreover, Smad3 increased the levels of type I procollagen, osteopontin (OPN), and matrix Gla protein (MGP) mRNA in Northern blotting. These effects of Smad3 mimicked the effects of TGF-β on the same cells. On the other hand, Smad3 greatly enhanced ALP activity and mineralization of MC3T3-E1 cells compared with empty vector, although TGF-β inhibited ALP activity and mineralization of wild-type MC3T3-E1 cells. A type I collagen synthesis inhibitor L-azetidine-2-carboxylic acid, as well as osteocalcin (OCN), significantly antagonized Smad3-stimulated ALP activity and mineralization of MC3T3-E1 cells. In conclusion, this study showed that in mouse osteoblastic cells, Smad3 inhibited proliferation, but it also enhanced ALP activity, mineralization, and the levels of bone matrix proteins such as type I collagen (COLI), OPN, and MGP. We propose that Smad3 plays an important role in osteoblastic bone formation and might help to elucidate the transcriptional mechanism of bone formation and possibly lead to the development of bone-forming drugs.