The tumor suppressor gene deleted in pancreatic cancer locus 4 (Smad4/DPC4) is inactivated in about 50% of pancreatic adenocarcinomas. The role of DPC4 in the transforming growth factor-beta (TGF-beta) receptor-mediated signal transduction cascade in human pancreatic, colon, and breast carcinoma cell lines has been investigated by a number of laboratories. The results demonstrate that Smad4/DPC4 protein functions as a key transcription factor required in regulation of TGF-beta inducible gene expression and subsequent growth inhibition. Many transcription regulators that are involved in cell growth, differentiation, and oncogenesis have been identified and cloned. Yet paradoxically, it is much more difficult to identify the important downstream target genes responsible for the biological effects elicited by these transcription factors. Although numerous attempts have been made and different approaches have been used to identify the target genes, only limited success has been achieved. Our data show that p21waf1 is one of the Smad4/DPC4-regulated downstream target genes and suggest that overexpression of the Smad4/DPC4 gene can bypass TGF-beta receptor activation and reestablish one of the key regulatory controls of cell proliferation. Identification of the Smad-regulated downstream target genes responsible for diverse biological processes that they control will extend our understanding of the mechanism for cell cycle regulation and cell differentiation.