Loss of the tumor suppressive effect of transforming growth factor-beta (TGF-beta) has been commonly found at later stages in carcinogenic progression. Although the genes encoding TGF-beta receptors and Smads have been found genetically altered in certain human cancers, no mutation in Smad3 has been observed. Therefore, suppression of Smad3 expression may mediate key oncogenic properties of TGF-beta. First, we observed that 37.5% of human gastric cancer tissues showed low to undetectable levels of Smad3 and that in nine human gastric cancer cell lines examined, two showed deficient Smad3 expression. Introduction of Smad3 into human gastric cancer cells that did not express Smad3, restored TGF-beta responsiveness: induction of p21 and p15 gene expression, and growth inhibition in response to TGF-beta. Furthermore, these Smad3-expressing cells showed markedly decreased and delayed tumorigenicity in vivo. These findings suggest that Smad3 expression may have a critical role in tumor suppression in the early stages of gastric carcinogenesis.