Objectives: Patients with diabetes exhibit a high prevalence of HFpEF associated with interstitial fibrosis and cardiomyocyte hypertrophy. However, the cellular and molecular mechanisms involved in diabetic heart disease remain poorly understood. TGF-bs are potent fibrogenic mediators that are activated in diabetic hearts, and act through a single type 2 receptor, TbRII. We hypothesized that fibroblast-specific actions of TGF-bs may mediate fibrosis and dysfunction in diabetic hearts. Methods and Results: To test the hypothesis, we developed lean and db/db type 2 diabetic TbRII KO mice (FTbRII2KO) using the Col1a2 CreER driver. Fibroblast-specific loss of TGF-b signaling attenuated hypertrophy in db/db mouse hearts. Speckle-tracking echocardiography with strain imaging showed that fibroblast-specific TbRII loss improved systolic and diastolic cardiac function in diabetic animals. In contrast, fibroblast TbRII disruption caused a worsening of both cardiac systolic and diastolic function in lean animals. Attenuated dysfunction in diabetic mice lacking fibroblast TGF-b signaling was associated with reduced collagen fiber thickness and with decreased cardiomyocyte size, suggesting paracrine effects of fibroblasts on cardiomyocytes. To study the downstream cascade responsible for the effects of TGF-b, we generated lean and diabetic mice with fibroblast-specific Smad3 loss. In db/db mice, fibroblast-specific Smad3 loss phenocopied the effects of fibroblast-specific TbRII disruption, suggesting that in diabetic cardiac fibroblasts TGF-b acts through Smad3 signaling. The bioinformatic analyses of transcriptomic profiles of cardiac fibroblasts identified thrombospondin 4 as a candidate mediator of Smad3-dependent diabetes-associated activation. Conclusions: Fibroblast-specific TGF-b actions in diabetes promote cardiac dysfunction through effects on collagen deposition and via paracrine actions on cardiomyocytes. The effects of TGF-b on diabetic cardiac fibroblasts are Smad3-dependent. In contrast to the deleterious effects of fibroblast TGFb/Smad3 signaling in diabetic hearts, TGF-b-activated Smad3-dependent signaling is important to maintain homeostatic function and geometry in normal lean animals.