The accumulation of extracellular matrix proteins is a common feature of fibrotic kidney diseases. Accumulating evidence suggests that TGF-beta and plasminogen activator inhibitor type 1 (PAI-1) promote the development of renal fibrosis by stimulating the generation and inhibiting the removal of matrix proteins. The small heterodimer partner (SHP) represses PAI-1 expression in the liver by inhibiting TGF-beta signaling, but whether SHP inhibits renal fibrosis is unknown. Here, unilateral ureteral obstruction (UUO) markedly increased the expression of PAI-1, type I collagen, and fibronectin but decreased SHP gene expression. Moreover, in kidneys of SHP-/- mice, the expression of PAI-1, type I collagen, fibronectin and alpha-smooth muscle actin (alpha-SMA) were higher compared with those in kidneys of wild-type mice. In addition, loss of SHP accelerated renal fibrosis after UUO. Adenovirus-mediated overexpression of SHP in cultured rat mesangial cells and renal tubular epithelial cells inhibited TGF-beta-stimulated expression of PAI-1, type I collagen, and fibronectin. SHP inhibited TGF-beta- and Smad3-stimulated PAI-1 promoter activities as well as TGF-beta-stimulated binding of Smad3 to its consensus response element on the PAI-1 promoter. Similarly, in vivo, adenovirus-mediated overexpression of SHP in the kidney inhibited the expression of UUO-induced PAI-1, type I collagen, fibronectin, and alpha-SMA. In summary, SHP attenuates renal fibrosis in obstructive nephropathy, making its pathway a possible therapeutic target for chronic kidney disease.