Smad proteins were identified three years ago as intracellular mediators of signaling by Transforming Growth Factor-beta (TGF-beta) family members. Two subclasses of the Smad proteins, the receptor-regulated Smads and common mediator Smads, transduce signals from the cell surface to the nucleus, where they participate in the regulation of gene expression. Meanwhile, it has become evident that Smads should be envisaged as very versatile proteins, which integrate multiple signaling pathways and can directly affect target gene expression in many ways. Indeed, their direct binding to DNA and their interaction in the nucleus with non-Smad proteins, many of which are DNA-binding activators or repressors of transcription uncover a unique but complex mode of action. We summarize some of the most recent data with regard to this aspect in this rapidly advancing field.