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The members of the TGF-beta superfamily, i.e., TGF-beta isoforms, activins, and bone morphogenetic proteins, regulate growth, differentiation, and apoptosis, both during embryonic development and during postnatal life. Smad7 is induced by the TGF-beta superfamily members and negatively modulates their signaling, thus acting in a negative, autocrine feedback manner. In addition, Smad7 is induced by other stimuli. Thus, it can fine-tune and integrate TGF-beta signaling with other signaling pathways. To investigate the functional role(s) of Smad7 in vivo, we generated mice deficient in exon I of Smad7, leading to a partial loss of Smad7 function. Mutant animals are viable, but significantly smaller on the outbred CD-1 mouse strain background. Mutant B cells showed an overactive TGF-beta signaling measured as increase of phosphorylated Smad2-positive B cells compared with B cells from wild-type mice. In agreement with this expected increase in TGF-beta signaling, several changes in B cell responses were observed. Mutant B cells exhibited increased Ig class switch recombination to IgA, significantly enhanced spontaneous apoptosis in B cells, and a markedly reduced proliferative response to LPS stimulation. Interestingly, LPS treatment reverted the apoptotic phenotype in the mutant cells. Taken together, the observed phenotype highlights a prominent role for Smad7 in development and in regulating the immune system's response to TGF-beta.