HIV-1 infection of the central nervous system (CNS) is associated with dysregulation of several important cytokines and chemokines, which are involved in inflammatory process. Earlier studies ascribed a critical role for Tat, a potent viral transcription activator, in this process by enhancing the expression of several immunomodulators including TGFbeta and MCP-1. Investigation of signaling pathways which are controlled by these cytokines led to identification of MH2 domain of Smad3, the downstream activator of TGFbeta pathway, as a modulator of MCP-1 promoter activity. The level of MCP-1 is increased in AIDS patients with neurologic problems, through recruitment of inflammatory cells, which can contribute to neuropathogenesis of AIDS. Therefore, we attempted to investigate the effect of MH2 on expression of MCP-1 and other immunolmodulators in CNS cells. By employing an adenovirus expression vector, we demonstrated that MH2 can decrease the levels of Tat-induced activation of MCP-1 and several other cytokines and chemokines in astrocytic cells. In addition, we showed that MH2 significantly reduced the activity of cytokines produced by cultures of adenovirus-MH2 transduced cells as measured by the transmigration of human PBMC cells. Thus, MH2 domain of Smad3 is a potential agent that may be developed as an inhibitor for the cytokine-mediated inflammatory responses in the brain and may have the potential to prevent transmigration of HIV-1-infected monocytes across the blood brain barrier in AIDS patients.