Smad transcription factors mediate the actions of transforming growth factor-beta (TGF-beta) cytokines during development and tissue homeostasis. TGF-beta receptor-activated Smad2 regulates gene expression by associating with transcriptional co-activators or co-repressors. The Smad co-repressor TGIF competes with the co-activator p300 for Smad2 association, such that TGIF abundance helps determine the outcome of a TGF-beta response. Small alterations in the physiological levels of TGIF can have profound effects on human development, as shown by the devastating brain and craniofacial developmental defects in heterozygotes carrying a hypomorphic TGIF mutant allele. Here we show that TGIF levels modulate sensitivity to TGF-beta-mediated growth inhibition, that TGIF is a short-lived protein and that epidermal growth factor (EGF) signaling via the Ras-Mek pathway causes the phosphorylation of TGIF at two Erk MAP kinase sites, leading to TGIF stabilization and favoring the formation of Smad2-TGIF co-repressor complexes in response to TGF-beta. These results identify the first mechanism for regulating TGIF levels and suggest a potential link for Smad and Ras pathway convergence at the transcriptional level.