The human papillomavirus (HPV) oncoprotein E7 is implicated in the etiology of cervical cancer associated with infection by HPV. HPV-positive cells develop resistance to TGF-beta growth inhibitory activity through the inhibition of hypophosphorylation of pRb by papillomavirus type 16 E7 oncoprotein. In this study, we examined whether E7, in addition to its well known effects on pRb, might directly target the Smad proteins that mediate TGF-beta signaling. Here, we show that E7 significantly blocks both Smad transcriptional activity and the ability of TGF-beta to inhibit DNA synthesis. We found that E7 interacts constitutively with Smad2, Smad3, and Smad4. Confocal microscopic studies confirm that E7 and Smads co-localize in vivo. Using a canonical Smad DNA binding sequence, we found that E7 blocks Smad3 binding to its target sequence on DNA. These results suggest that suppression of Smad-mediated signaling by E7 may contribute to HPV-associated carcinogenesis.