Activation of transforming growth factor-beta (TGF-beta) and activin receptors leads to phosphorylation of Sma- and Mad-related protein 2 (Smad2) and Smad3, which function as transcription factors to regulate gene expression. Smad7 is a regulatory protein which is able to inhibit TGF-beta and activin signalling in a negative-feedback loop, mediated by a direct regulation by Smad3 and Smad4 via a Smad-binding element (SBE) in the Smad7 promoter. Interestingly, we found that the Smad7 promoter was also regulated by nuclear factor kappaB (NF-kappaB), a transcription factor which plays an important role in inflammation and the immune response. Expression of NF-kappaB p65 subunit was able to inhibit the Smad7 promoter activity, and this inhibition could be reversed by co-expression of IkappaB, an inhibitor of NF-kappaB. In addition, the inhibitory activity of p65 was observed in a minimal promoter that contained only the Smad7 SBE and a TATA box, without any consensus NF-kappaB binding site. This inhibitory effect appeared to be common to other TGF-beta- and activin-responsive promoters, since p65 also inhibited the forkhead-activin-signal-transducer-2-mediated activation of a Xenopus Mix.2 promoter, as well as the Smad3-mediated activation of 3TP-lux which contains PMA-responsive elements and a plasminogen-activator-inhibitor-1 promoter. Activation of endogenous NF-kappaB by tumour necrosis factor-alpha (TNF-alpha) was also able to inhibit the Smad7 promoter in human embryonic kidney 293 cells. In human hepatoma HepG2 cells, TNF-alpha was able to inhibit TGF-beta- and activin-mediated transcriptional activation. Furthermore, overexpression of the transcription co-activator p300 could abrogate the inhibitory effect of NF-kappaB on the Smad7 promoter. Taken together, these data have indicated a novel mode of crosstalk between the Smad and the NF-kappaB signalling cascades at the transcriptional level by competing for a limiting pool of transcription co-activators.