Smads, signal transducers of the transforming growth factor-beta (TGF-beta) superfamily proteins, directly bind to DNA and regulate transcription of target genes. Smad3 binds to CAGA box, whereas Smad1 and Smad5 preferentially bind to GC-rich sequences. The beta-hairpin loop in the amino-terminal Mad homology 1 (MH1) domain is the direct DNA-binding site of Smad3; however, the amino acid sequences of the beta-hairpin loop of Smad3 and Smad1/5 are identical, suggesting that other regions may be responsible for the differential DNA binding of Smad3 and Smad1/5. To identify regions other than the beta-hairpin loop responsible for specific DNA binding of Smad3, we generated chimeras containing various regions of Smad3 and Smad1. Luciferase assays using a TGF-beta-responsive reporter (CAGA)9-MLP-Luc and gel-mobility shift assays using 3xCAGA as a probe revealed that alpha-helix 2 (H2) in the amino-terminal part of the MH1 domain plays an important role in specific DNA binding and transcriptional activation of Smad3. Luciferase assays using natural TGF-beta-responsive reporters also revealed the functional importance of H2 in the Smad3 MH1 domain in direct DNA binding. Smad3 thus binds to DNA directly through the beta-hairpin loop, and H2 supports specific DNA binding of Smad3.