Many forms of vascular disease are characterized by increased transforming growth factor (TGF)-beta1 expression and endothelial dysfunction. Smad proteins are a key step in TGF-beta-initiated signal transduction. We hypothesized that NO may regulate endothelial TGF-beta-dependent gene expression. We show that NO inhibits TGF-beta/Smad-regulated gene transactivation in a cGMP-dependent manner. NO effects were mimicked by a soluble analogue of cGMP. Inhibition of cGMP-dependent protein kinase 1 (PKG-1) or overexpression of dominant-negative PKG-1alpha suppressed NO/cGMP inhibition of TGF-beta-induced gene expression. Inversely, overexpression of PKG-1alpha catalytic subunit blocked TGF-beta-induced gene transactivation. Furthermore NO delayed and reduced phosphorylated Smad2/3 nuclear translocation, an effect mediated by PKG-1, whereas NG-nitro-L-arginine methyl ester augmented Smad phosphorylation and gene expression in response to TGF-beta. Aortas from endothelial NO synthase-deficient mice showed enhanced basal TGF-beta1 and collagen type I expression; endothelial cells from these animals showed increased Smad phosphorylation and transcriptional activity. Proteasome inhibitors prevented the inhibitory effect of NO on TGF-beta signaling. NO reduced the metabolic life of ectopically expressed Smad2 and enhanced its ubiquitination. Taken together, these results suggest that the endothelial NO/cGMP/PKG pathway interferes with TGF-beta/Smad2 signaling by directing the proteasomal degradation of activated Smad.