Hydrogen peroxide (H 2 O 2 ) functions as a second messenger in growth factor receptor-mediated intracellular signaling cascade and is tumorigenic by virtue of its ability to promote cell proliferation; however, the mechanisms underlying the growth stimulatory action of H 2 O 2 are less understood. Here we report an important mechanism for antagonistic effects of H 2 O 2 on growth inhibitory response to transforming growth factor-β1 (TGF-β1). In Mv1Lu and HepG2 cells, pretreatment of H 2 O 2 (0.05–0.2mM) completely blocked TGF-β1-mediated induction of p15 INK4B expression and increase of its promoter activity. Interestingly, H 2 O 2 selectively suppressed the transcriptional activation potential of Smad3, not Smad2, in the absence of effects on TGF-β1-induced phosphorylation of the COOH-tail SSXS motif of Smad3 and its nuclear translocation. Mechanism studies showed that H 2 O 2 increases the phosphorylation of Smad3 at the middle linker region in a concentration- and time-dependent manner and this effect is mediated by activation of extracellular signal-activated kinase 1/2 through Akt. Furthermore, expression of a mutant Smad3 in which linker phosphorylation sites were ablated significantly abrogated the inhibitory effects of H 2 O 2 on TGF-β1-induced increase of p15 INK4B -Luc reporter activity and blockade of cell cycle progression from G1 to S phase. These findings for the first time define H 2 O 2 as a signaling molecule that modulate Smad3 linker phosphorylation and its transcriptional activity, thus providing a potential mechanism whereby H 2 O 2 antagonizes the cytostatic function of TGF-β1.