Through the action of its membrane-bound type I receptor, transforming growth factor-beta (TGF-beta) elicits a wide range of cellular responses that regulate cell proliferation, differentiation, and apo ptosis. Many of these signaling responses are mediated by Smad proteins. As such, controlling Smad activity is crucial for proper signaling by TGF-beta and its related factors. Here, we show that TGF-beta induces phosphorylation at three sites in the Smad3 linker region in addition to the two C-terminal residues, and glycogen synthase kinase 3 is responsible for phosphorylation at one of these sites, namely Ser-204. Alanine substitution at Ser-204 and/or the neighboring Ser-208, the priming site for glycogen synthase kinase 3 in vivo activity, strengthened the affinity of Smad3 to CREB-binding protein, suggesting that linker phosphorylation may be part of a negative feedback loop that modulates Smad3 transcriptional activity. Thus, our findings reveal a novel aspect of the Smad3 signaling mechanism that controls the final amplitude of cellular responses to TGF-beta.