Transforming growth factor beta (TGF-beta) induces apoptosis in a variety of cells. We have previously shown that TGF-beta 1 rapidly induces apoptosis in the FaO rat hepatoma cell line. We have now studied the effect of TGF-beta 1 on the expression of different members of the Bcl-2 family in these cells. We observed no detectable changes in the steady-state levels of Bcl-2, Bcl-X(L), and Bax. However, TGF-beta 1 induced caspase-dependent cleavage of BAD at its N terminus to generate a 15-kDa truncated protein. Overexpression of the 15-kDa truncated BAD protein enhanced TGF-beta 1-induced apoptosis, whereas a mutant BAD resistant to caspase 3 cleavage blocked TGF-beta 1-induced apoptosis. Overexpression of Smad3 dramatically enhanced TGF-beta 1-induced cleavage of BAD and apoptosis, whereas antisense Smad3 blocked TGF-beta 1-induced apoptosis and BAD cleavage. These results suggest that TGF-beta 1 induces apoptosis through the cleavage of BAD in a Smad3-dependent mechanism.