Transforming growth factor (TGF)-β is a pleiotropic cytokine regulating a variety of cellular processes such as cell growth, differentiation, apoptosis, migration, cell adhesion, and immune response. In the well-understood classical TGF-β signaling pathway, TGF-β activates Smad signalling via its two cell surface receptors such as TβRII and ALK5/TβRI, leading to Smad-mediated transcriptional regulation. In addition, TGF-β may also activate other signaling pathways like mitogen-activated protein kinase, PI3K, etc. The signaling of TGF-β is finely regulated at different levels. Inhibitory Smads, including Smad6 and Smad7, are key regulators of TGF-β/bone morphogenetic protein (BMP) signaling by negative feedback loops. They can form stable complexes with activated type I receptors and thereby blocking the phosphorylation of R-Smads, or recruit ubiquitin E3 ligases, such as Smurf1/2, resulting in the ubiquitination and degradation of the activated type I receptors. Besides, these inhibitory Smad proteins also inhibit TGF-β/BMP signaling in the nucleus by interacting with transcriptional repressors, such as histone deacetylases, Hoxc-8, and CtBP, or disrupting the formation of the TGF-β-induced functional Smad-DNA complexes. Smad7 is in turn regulated by different stimuli, including TGF-β, IFN-γ, TNF-α as well as ultraviolet and TPA, and mediates the crosstalk between TGF-β and other signaling pathways. Deregulation of Smad7 expression has been associated with various human diseases, such as tissue fibrosis, inflammatory disease as well as carcinogenesis. Overexpression of Smad7 has been shown to antagonize TGF-β-mediated fibrosis, carcinogenesis, and inflammation, suggesting a therapeutic potential of Smad7 to treat these diseases.