Smad3 is a direct mediator of transcriptional activation by the TGFbeta receptor. Its target genes in epithelial cells include cyclin-dependent kinase inhibitors that generate a cytostatic reponse. We defined how, in the same context, Smad3 can also mediate transcriptional repression of the growth-promoting gene c-myc. A complex containing Smad3, the transcription factors E2F4/5 and DP1, and the corepressor p107 preexists in the cytoplasm. In response to TGFbeta, this complex moves into the nucleus and associates with Smad4, recognizing a composite Smad-E2F site on c-myc for repression. Previously known as the ultimate recipients of cdk regulatory signals, E2F4/5 and p107 act here as transducers of TGFbeta receptor signals upstream of cdk. Smad proteins therefore mediate transcriptional activation or repression depending on their associated partners.