We have shown that Smad3, an intracellular signal transducer for transforming growth factor-beta1 (TGF-beta1), is required to elicit the full histological manifestations of obliterative airway disease in a tracheal transplant model. This suggests that chronic allograft rejection results in TGF-beta1-induced Smad3 activation that leads to airway obliteration through fibroproliferation and increased matrix deposition. In other systems, these latter events are causally related to the transdifferentiation of fibroblasts into myofibroblasts, but their role in obliterative bronchiolitis (OB) after lung transplantation is unknown. We confirmed the presence of myofibroblasts inside affected airways associated with experimental OB using immunohistochemistry. Studying airway fibroblasts in vitro, we observed increased myofibroblast transdifferentiation in response to TGF-beta1, evidenced by increased alpha-smooth muscle actin mRNA and protein expression. In Smad3-null fibroblasts, TGF-beta1 induction of myofibroblast transdifferentiation was greatly diminished but not abolished, suggesting the presence of Smad3-independent pathways. Further studies revealed that small molecule inhibitors of p38 (SB203580) and MEK/ERK (U1026) further reduced the remaining effect of TGF-beta1 in Smad3-deficient fibroblasts. Together, these studies suggest that in chronic allograft rejection, TGF-beta1 stimulates myofibroblast transdifferentiation through Smad3-dependent and -independent signals, contributing to the excessive matrix deposition that characterizes obliterative bronchiolitis.