Transforming growth factor-beta1 (TGF-beta1)-mediated loss of proximal tubular epithelial cell-cell interaction is regulated in a polarized fashion. The aim of this study was to further explore the polarity of the TGF-beta1 response and to determine the significance of R-Smad-beta-catenin association previously demonstrated to accompany adherens junction disassembly. Smad3 signaling response to TGF-beta1 was assessed by activity of the Smad3-responsive reporter gene construct (SBE)(4)-Lux and by immunoblotting for phospho-Smad proteins. Similar results were obtained with both methods. Apical application of TGF-beta1 led to increased Smad3 signaling compared with basolateral stimulation. Association of Smad proteins with beta-catenin was greater following basolateral TGFbeta-1 stimulation, as was the expression of cytoplasmic Triton-soluble beta-catenin. Inhibition of beta-catenin expression by small interfering RNA augmented Smad3 signaling. Lithium chloride, a GSK-3 inhibitor, increased expression of beta-catenin and attenuated TGF-beta1-dependent Smad3 signaling. Lithium chloride did not influence degradation of Smad3 but resulted in decreased nuclear translocation. Smad2 activation as assessed by Western blot analysis and activity of the Smad2-responsive reporter constructs ARE/MF1 was also greater following apical as compared with basolateral TGFbeta-1 stimulation, suggesting that this is a generally applicable mechanism for the regulation of TGF-beta1-dependent R-Smads. Caco-2 cells are a colonic carcinoma cell line, with known resistance to the anti-proliferative effects of TGF-beta1 and increased expression of beta-catenin. We used this cell line to address the general applicability of our observations. Inhibition of beta-catenin in this cell line by small interfering RNA resulted in increased TGF-beta1-dependent Smad3 phosphorylation and restoration of TGF-beta1 anti-proliferative effects.