Transforming growth factor-beta (TGF-beta) signaling plays an important regulatory role during lung development and remodeling. Smad3 is a major downstream signal transducer in the TGF-beta pathway from the cell membrane to the nucleus. In Smad3 null mutant mice, we have observed retarded lung alveolarization from postnatal day 7 to day 28, and subsequently centrilobular emphysema starting from day 28, as determined by morphometric analysis. In addition to the morphological changes, peripheral lung cell proliferation in Smad3 knockout mice was reduced compared with the wild-type control between postnatal days 7 and 28. Expression of tropoelastin at the mRNA level was also dramatically decreased in Smad3 knockout lungs from postnatal day 28 through adulthood. Furthermore, increased matrix metalloproteinase-9 protein expression and activity were detected in the Smad3 knockout mouse lung tissue and the bronchoalveolar lavage fluid at postnatal day 28 when the centrilobular emphysema pathology was just beginning to appear. Therefore, these results indicate that Smad3 not only has a positive regulatory impact on neonatal lung alveolarization but also potentially plays a protective role against the occurrence of centrilobular emphysema later on in life.