The transforming growth factor (TGF)-beta family members, bone morphogenetic protein (BMP)-2 and TGF-beta that signal via the receptor-regulated Smads (R-Smads) induce bone formation in vivo. The inhibitory Smads (I-Smads), Smad6 and Smad7, negatively regulate TGF-beta family ligand signaling by competing with R-Smads for binding to activated type I receptors, and preventing R-Smad activation, Hence, the I-Smads potentially act as suppressors of bone formation although their effects on phenotypic changes in mature osteoblasts are unclear. While Smad7 inhibits both BMP and TGF-beta signaling, Smad6 is less effective in inhibiting TGF-beta signaling. The present study was performed to examine the role of Smad7 on the phenotype of mouse osteoblastic MC3T3-E1 cells. We employed stable Smad7-transfected MC3T3-E1 cells to examine the role of Smad7 in osteoblast proliferation, differentiation and mineralization. Stable Smad7 overexpression significantly inhibited the absorbance in the MTT-dye assay and inhibited the levels of PCNA compared with those in empty vector-transfected cells. Smad7 overexpression suppressed the type 1 collagen mRNA and protein levels. Moreover, Smad7 inhibited ALP activity and mineralization of osteoblastic cells. The effects of stable overexpression of Smad6 were similar to those of Smad7 suggesting the changes mediated by either I-Smad occurred by inhibition of BMP rather than TGF-beta signaling. In addition, PTH-(1-34) elevated the levels of Smad7 in parental MC3T3-E1 cells. In conclusion, the present study demonstrated that Smad7, as well as Smad6, inhibits proliferation, differentiation and mineralization of mouse osteoblastic cells. Therefore, I-Smads are important molecular targets for the negative control of bone formation.