The expression of Smad7, a tumor growth factor-β (TGFβ) antagonist, is increased during cutaneous wound healing. To assess this significance, we temporally induced Smad7 transgene expression in wounded skin in gene-switch-Smad7 transgenic (Smad7 tg) mice. Smad7 induction in epidermal keratinocytes caused an increase in keratinocyte proliferation with reduced Smad2 activation, indicating that Smad7 abrogated TGFβ-mediated growth inhibition. Additionally, wounded skin from Smad7 tg mice exhibited accelerated re-epithelialization, with increased activation of extracellular signal-regulated kinase (Erk), and an in vitro migration assay revealed that Erk activation contributed to Smad7-mediated keratinocyte migration. Notably, epidermis-specific Smad7 transgene expression also has a profound effect on the wound stroma, resulting in reduced inflammation, angiogenesis, and production of type I collagen. Reduced Smad2 activation was observed in wounded stroma from Smad7 transgenic (Smad7 tg) mice, possibly owing to fewer infiltrated TGFβ-producing leukocytes compared to those in wounds from control mice. Because Smad7 is not secreted, these effects could reflect functional changes in Smad7 tg keratinocytes. Supporting this notion, the activation of NF-κB, a nonsecreted protein complex that transcriptionally activates inflammatory cytokines, was reduced in wounded epidermis from Smad7 tg mice compared to that in wounded wild-type epidermis. In sum, epidermal Smad7 overexpression accelerated wound healing through its direct effects on keratinocyte proliferation and migration, and through indirect effects on wound stroma.