The tumor suppressor Smad4 plays a critical role in the transforming growth factor-beta (TGF-beta signaling pathway. Smad4 is an essential component of transcriptional complexes mediating the activation of Smad-dependent target genes. However, how Smad4 regulates various chromosomal events remains unknown. Here, we report that Smad4 induces large-scale chromatin unfolding by targeting Smad4 to an amplified, lac operator-containing chromosome region in mammalian cells. This unfolding activity maps to the subdomains within the transactivation domain of Smad4. Both the N-terminal missense and the C-terminal truncated tumor-derived mutations increased the chromatin unfolding activity of Smad4. These data identify a novel function of Smad4 and suggest that regulation of large-scale chromatin unfolding by Smad4 may be responsible for cancer development.