Transforming growth factor-β (TGF-β) is upregulated at the time of arterial injury; however, the mechanism through which TGF-β enhances the development of intimal hyperplasia is not clear. Recent studies from our laboratory suggest that in the presence of elevated levels of Smad3, TGF-β stimulates smooth muscle cell (SMC) proliferation. This is a novel phenomenon in that TGF-β has traditionally been known as a potent inhibitor of cellular proliferation. In these studies we explore the signaling pathways through which TGF-β mediates its proliferative effect in vascular SMCs. We found that TGF-β phosphorylates and activates Akt in a time-dependent manner, and this effect is significantly enhanced by overexpression of Smad3. Furthermore, both chemical and molecular inhibition of Smad3 can reverse the effect of TGF-β on Akt. Although we found numerous signaling pathways that might function as intermediates between Smad3 and Akt, p38 appeared the most promising. Overexpression of Smad3 enhanced p38 phosphorylation and inhibition of p38 with a chemical inhibitor or a small interfering RNA blocked TGF-β-induced Akt phosphorylation. Moreover, TGF-β/Smad3 enhancement of SMC proliferation was blocked by inhibition of p38. Phosphorylation of Akt by TGF-β/Smad3 was not dependent on gene expression or protein synthesis, and immunoprecipitation studies revealed a physical association among p38, Akt, and Smad3 suggesting that activation requires a direct protein-protein interaction. Our findings were confirmed in vivo where overexpression of Smad3 in a rat carotid injury model led to enhancement of p-p38, p-Akt, as well as SMC proliferation. Furthermore, inhibition of p38 in vivo led to decreased Akt phosphorylation and SMC proliferation. In summary, our studies reveal a novel pathway whereby TGF-β/Smad3 stimulates SMC proliferation through p38 and Akt. These findings provide a potential mechanism for the substantial effect of TGF-β on intimal hyperplasia and suggest new targets for chemical or molecular prevention of vascular restenosis.