Transforming growth factor‐β (TGF‐β) family members which include TGF‐βs, activins, and bone morphogenetic proteins (BMPs) regulate a broad spectrum of biological responses on a large variety of cell types. TGF‐β family members initiate their cellular responses by binding to distinct receptors with intrinsic serine/threonine kinase activity and activation of specific downstream intracellular effectors termed Smad proteins. Smads relay the signal from the cell membrane to the nucleus, where they affect the transcription of target genes. Smad activation, subcellular distribution, and stability have been found to be intricately regulated and a broad array of transcription factors have been identified as Smad partners. Important activities of TGF‐β are its potent anti‐mitogenic and pro‐apoptotic effects that, at least in part, are mediated via Smad proteins. Escape from TGF‐β/Smad‐induced growth inhibition and apoptosis is frequently observed in tumors. Certain Smads have been found to be mutated in specific types of cancer and gene ablation of particular Smads in mice has revealed increased rate of tumorigenesis. In late stage tumors, TGF‐β has been shown to function as a tumor promoter. TGF‐β can stimulate the de‐differentiation of epithelial cells to malignant invasive and metastatic fibroblastic cells. Interestingly, TGF‐β may mediate these effects directly on tumor cells via subverted Smad‐dependent and/or Smad‐independent pathways. J. Cell. Physiol. 191: 1–16, 2002. © 2002 Wiley‐Liss, Inc.