Recent studies of the Smad family proteins, which are the key signal transducers of the TGF-beta family ligands, have revealed the ability of Smads to interact with various components of the 26S proteasome system. Such interactions are now known to contribute to the regulation of Smad protein levels before and after Smad activation. Most importantly, such interactions are also shown to be an integral part of the signaling functions of Smads. Through a physical interaction with different ubiquitin E3 ligases (HECT family, SCF and APC complex), the TGF-beta/activin responsive Smad3 exhibits the novel ability to regulate the ubiquitination of several key regulators, such as the oncoprotein SnoN and the multi-domain docking protein HEF1. The proteasomal degradation of these two proteins links TGF-beta signaling to multiple signaling pathways involving SnoN and HEF1. Through the interaction with proteasome beta subunit HsN3 and the substrate marker protein ornithine decarboxylase antizyme (AZ), the BMP responsive Smad1 regulates the proteasomal targeting events that contribute to the degradation of Smad1 and its interacting proteins, one of which is SNIP1, a repressor of the transcriptional co-activator CBP/p300. Thus, the novel physical link between Smads and components in the 26S proteasome system allow the intracellular events triggered by the TGF-beta family ligands to connect with those induced by many other extracellular regulators, thereby forming an extremely complex signaling network to regulate a wide range of biological activities.