Myofibroblasts play important roles in a variety of developmental and pathological processes, such as vascular remodeling, atherosclerosis and wound healing. In this study, we used the TGF-beta1-treated 10T1/2 cells as an in vitro model to understand how Smad-mediated TGF-beta1 signals regulate SM22 promoter transcription during myofibroblast differentiation. We found that TGF-beta1 transiently induces SRF and SM22 transcription, and that this process is accompanied by transient increases of SRF and Smad3 binding to the SM22 promoter. Interestingly, Smad3, not Smad2, is the primary mediator for TGF-beta1-induced transactivation of the SM22 promoter, while Smad6 and Smad7 repress such a transactivation. Smad3 can bind to a Smad-binding element (SBE) in the first exon of SM22, and directly associate with the SRF complex in response to TGF-beta1 treatment. Moreover, Smad3 and I-Smads regulate the SM22 promoter through CArG box-dependent transcription using dominant-negative SRF mutants and SRF-VP16. Although SBE as well as CArG boxes and TGF-beta control element are all important for the SM22 promoter activities, the promoters with mutations at either one or all of them still respond to TGF-beta1 treatment. Consistently, TGF-beta1 stimulates SM22 transcription in Smad3 null mouse embryonic fibroblasts. These findings provide the first evidence that Smad3 directly links TGF-beta1 signaling to an SRF-associated regulatory network in controlling SM22 transcription; it also implies that TGF-beta1 regulates the SM22 promoter via Smad3-dependent and Smad3-independent pathways.