Transforming growth factor-beta (TGF-beta) signaling requires the action of Smad proteins in association with other DNA-binding factors and coactivator and corepressor proteins to modulate target gene transcription. Smad2 and Smad3 both associate with the c-Ski and Sno oncoproteins to repress transcription of Smad target genes via recruitment of a nuclear corepressor complex. Ski-interacting protein (SKIP), a nuclear hormone receptor coactivator, was examined as a possible modulator of transcriptional regulation of the TGF-beta-responsive promoter from the plasminogen activator inhibitor gene-1. SKIP augmented TGF-beta-dependent transactivation in contrast to Ski/Sno-dependent repression of this reporter. SKIP interacted with Smad2 and Smad3 proteins in vivo in yeast and in mammalian cells through a region of SKIP between amino acids 201-333. In vitro, deletion of the Mad homology domain 2 (MH2) domain of Smad3 abrogated SKIP binding, like Ski/Sno, but the MH2 domain of Smad3 alone was not sufficient for protein-protein interaction. Overexpression of SKIP partially overcame Ski/Sno-dependent repression, whereas Ski/Sno overexpression attenuated SKIP augmentation of TGF-beta-dependent transcription. Our results suggest a potential mechanism for transcriptional control of TGF-beta signaling that involves the opposing and competitive actions of SKIP and Smad MH2-interacting factors, such as Ski and/or Sno. Thus, SKIP appears to modulate both TGF-beta and nuclear hormone receptor signaling pathways.