Transforming growth factor-beta (TGF-beta) inhibits cell proliferation in many cell types, and acquisition of TGF-beta resistance has been linked to tumorigenesis. One class of proteins that plays a key role in the TGF-beta signal transduction pathway is the SMAD protein family. MDM2, a key negative regulator of p53, has recently been shown to suppress TGF-beta-induced growth arrest in a p53-independent manner. Here we show that MDM2 and the structurally related protein MDMX can inhibit the transcriptional activity of ectopically expressed SMAD1, SMAD2, SMAD3, and SMAD4. Immunofluorescence staining indicated that ectopically expressed SMAD4 was present in both the cytoplasm and nucleus, and MDM2 and NIDMX were localized mainly to the nucleus and cytoplasm, respectively. When SMAD4 was coexpressed with either MDM2 or MDMX, nuclear accumulation of SMAD4 was strikingly inhibited. We have no evidence that SMAD4 binds directly to MDM2 or MDMX; hence, the inactivation and nuclear exclusion of SMAD4 by MDM2/MDMX may involve other indirect mechanisms.