Severe acute respiratory syndrome (SARS) is an acute infectious disease with significant mortality. A typical clinical feature associated with SARS is pulmonary fibrosis and the associated lung failure. However, the underlying mechanism remains elusive. In this study, we demonstrate that SARS-associated coronavirus (SARS-CoV) nucleocapsid (N) protein potentiates transforming growth factor-beta (TGF-beta)-induced expression of plasminogen activator inhibitor-1 but attenuates Smad3/Smad4-mediated apoptosis of human peripheral lung epithelial HPL1 cells. The promoting effect of N protein on the transcriptional responses of TGF-beta is Smad3-specific. N protein associates with Smad3 and promotes Smad3-p300 complex formation while it interferes with the complex formation between Smad3 and Smad4. These findings provide evidence of a novel mechanism whereby N protein modulates TGF-beta signaling to block apoptosis of SARS-CoV-infected host cells and meanwhile promote tissue fibrosis. Our results reveal a novel mode of Smad3 action in a Smad4-independent manner and may lead to successful strategies for SARS treatment by targeting the TGF-beta signaling molecules.