Transforming growth factor (TGF)-β is up-regulated in the diabetic myocardium and may mediate fibroblast activation. We aimed at examining the role of TGF-β-induced fibroblast activation in the pathogenesis of diabetic cardiomyopathy. We generated lean and obese db/db mice with fibroblast-specific loss of TbR2, the Type 2 receptor-mediating signaling through all three TGF-β isoforms, and mice with fibroblast-specific Smad3 disruption. Systolic and diastolic function, myocardial fibrosis, and hypertrophy were assessed. Transcriptomic studies and in vitro experiments were used to dissect mechanisms of fibroblast activation. Fibroblast-specific TbR2 loss attenuated systolic and diastolic dysfunction in db/db mice. The protective effects of fibroblast TbR2 loss in db/db mice were associated with attenuated fibrosis and reduced cardiomyocyte hypertrophy, suggesting that in addition to their role in fibrous tissue deposition, TGF-β-stimulated fibroblasts may also exert paracrine actions on cardiomyocytes. Fibroblast-specific Smad3 loss phenocopied the protective effects of fibroblast TbR2 loss in db/db mice. Db/db fibroblasts had increased expression of genes associated with oxidative response (such as Fmo2, encoding flavin-containing monooxygenase 2), matricellular genes (such as Thbs4 and Fbln2), and Lox (encoding lysyl oxidase). Ingenuity pathway analysis (IPA) predicted that neurohumoral mediators, cytokines, and growth factors (such as AGT, TGFB1, and TNF) may serve as important upstream regulators of the transcriptomic profile of diabetic mouse fibroblasts. IPA of scRNA-seq data identified TGFB1, p53, MYC, PDGF-BB, EGFR, and WNT3A/CTNNB1 as important upstream regulators underlying fibroblast activation in db/db hearts. Comparison of the transcriptome of fibroblasts from db/db mice with fibroblast-specific Smad3 loss and db/db Smad3 fl/fl controls identified Thbs4 [encoding thrombospondin-4 (TSP-4), a marker of activated fibroblasts] as a candidate diabetes-induced fibrogenic mediator. However, in vitro experiments showed no significant activating effects of matricellular or intracellular TSP-4 on cardiac fibroblasts. Fibroblast-specific TGF-β/Smad3 signaling mediates ventricular fibrosis, hypertrophy, and dysfunction in Type 2 diabetes.