Human fibroproliferative disorders like hypertrophic scarring of the skin are characterized by increased contractility and excess extracellular matrix synthesis. A beneficial role of transforming growth factor (TGF)-beta in wound healing was proposed; however, chronic stimulation by this cytokine leads to fibrosis. In the present report, the intracellular TGF-beta signaling in fibroblasts derived from hypertrophic scars and normal skin was examined. In an attempt to intervene in profibrogenic TGF-beta functions, ectopic expression of Smad7 or dominant negative Smads3/4 completely inhibited contractility of scar-derived and normal fibroblasts after suspension in collagen gels. Both cell types displayed constitutive Smad2/3 phosphorylation and (CAGA)9-MLP-Luc activity with expression and phosphorylation of Smad3 being predominant in hypertrophic scar-derived fibroblasts. Down-regulation of intrinsic signaling with various TGF-beta antagonists, e.g. soluble TGF-beta receptor, latency-associated peptide, and anti-TGF-beta1 antibodies, confirms autocrine TGF-beta stimulation of both cell populations. Further, Smad7 expression inhibited alpha1 (I) collagen and alpha-smooth muscle actin expression. In summary, our data indicate that autocrine TGF-beta/Smad signaling is involved in contractility and matrix gene expression of fibroblasts from normal and hypertrophic scars. Smad7 inhibits these processes and may exert beneficial effects on excessive scar formation.