Regulator of G protein signaling RGS3 belongs to a family of RGS proteins that contain the homologous RGS domain which binds the alpha subunits of heterotrimeric G proteins and accelerates their GTPase activity. Through this mechanism RGS3 regulates the signaling mediated by a variety of Gq and Gi coupled receptors. In this study, we found that RGS3 interacts with the novel partners, Smad2, Smad3 and Smad4 ‐ the transcription factors that are activated through a transforming growth factor‐beta (TGF‐beta) receptor signaling. This interaction is mediated by Smad's Mad homology domain 2 (MH2) and by the region of RGS3 outside of the RGS domain. Overexpression of RGS3 results in inhibition of Smad‐mediated gene transcription. RGS3 does not affect TGF‐beta ‐ induced Smad phosphorylation, but it prevents heteromerization of Smad3 with Smad4, which is required for Smad's transcriptional activity. Functionally, this translates to inhibition of TGF‐beta – induced myofibroblast differentiation by adenovirus‐mediated overexpression of RGS3. In conclusion, this study identifies a novel, non‐canonical role of RGS3 in regulation of TGF‐beta signaling through its interaction with Smad transcription factors.