PPARgamma agonists inhibit liver fibrosis, but the mechanisms involved are uncertain. We hypothesized that PPARgamma agonists inhibit transforming growth factor (TGF)beta1-activation of TGFbeta receptor (TGFbetaR)-1 signaling in quiescent stellate cells, thereby abrogating Smad3-dependent induction of extracellular matrix (ECM) genes, such as PAI-1 and collagen-1alphaI. To test this, human HSC were cultured to induce a quiescent phenotype, characterized by lipid accumulation and PPARgamma expression and transcriptional activity. These adipocytic HSC were then treated with TGFbeta1+/-a TGFbetaR-1 kinase inhibitor (SB431542) or a PPARgamma agonist (GW7845). TGFbeta1 caused dose- and time-dependent increases in Smad3 phosphorylation, followed by induction of collagen and PAI-1 expression. Like the TGFbetaR-1 kinase inhibitor, the PPARgamma agonist caused dose-dependent inhibition of all of these responses without effecting HSC proliferation or viability. Thus, the anti-fibrotic actions of PPARgamma agonists reflect their ability to inhibit TGFbeta1-TGFbetaR1 signaling that initiates ECM gene expression in quiescent HSC.