Expression of several cytokines involved in signal transduction such as TGFbeta-1 and the inflammatory chemokines including MCP-1 is elevated during the course of AIDS progression. The enhancement of these cellular proteins in astrocytic cells is mediated, at least in part, by HIV-1 Tat protein. Here, we investigate the possible regulation of MCP-1 transcription by Tat and the Smad family of transcription factors whose activities are induced by the TGFbeta-1 pathway. Results from transfection studies revealed that Smad-3 stimulates basal and Tat-mediated transcription of MCP-1 in human astrocytic cells. Smad-4, on the other hand, had no effect on the basal activity of the MCP-1 promoter, but showed the ability to decrease both Smad-3 and Tat-induced transcription of the MCP promoter. Results from protein-binding studies revealed the ability of both Smad-3 and Smad-4 to associate with the region of Tat spanning residues 1-40. Examination of the transcriptional activity of the various domains of Smad including MH1, at the N-terminus, and MH2, at the C-terminus of the protein indicated that neither MH1 or MH2 alone positively cooperate with Tat in modulating MCP-1 transcription. However, ectopic expression of MH1 and, more notably, MH2 severely suppressed transcriptional activation of MCP-1 by Tat in astrocytic cells. Binding studies revealed that similar to the full-length Smad protein, both MH1 and MH2 associate with Tat protein and that the residues between 1 and 40 of Tat are important for their interaction. These observations reveal a novel mechanism for Tat-mediated transcriptional activation via TGFbeta signaling pathway and provide evidence for regulation of MCP-1 gene transcription by this signaling pathway in human astrocytic cells.