Although it has been well established that TGF-beta plays a pivotal role in immune regulation, the roles of its downstream transcription factors, Smad2 and Smad3, have not been fully clarified. Specifically, the function of Smad2 in the immune system has not been investigated because of the embryonic lethality of Smad2-deficient mice. In this study, we generated T cell-specific Smad2 conditional knockout (KO) mice and unexpectedly found that Smad2 and Smad3 were redundantly essential for TGF-beta-mediated induction of Foxp3-expressing regulatory T cells and suppression of IFN-gamma production in CD4(+) T cells. Consistent with these observations, Smad2/Smad3-double KO mice, but not single KO mice, developed fatal inflammatory diseases with higher IFN-gamma production and reduced Foxp3 expression in CD4(+) T cells at the periphery. Although it has been suggested that Foxp3 induction might underlie TGF-beta-mediated immunosuppression, TGF-beta still can suppress Th1 cell development in Foxp3-deficient T cells, suggesting that the Smad2/3 pathway inhibits Th1 cell development with Foxp3-independent mechanisms. We also found that Th17 cell development was reduced in Smad-deficient CD4(+) T cells because of higher production of Th17-inhibitory cytokines from these T cells. However, TGF-beta-mediated induction of RORgamma t, a master regulator of Th17 cell, was independent of both Smad2 and Smad3, suggesting that TGF-beta regulates Th17 development through Smad2/3-dependent and -independent mechanisms.