Smad proteins play key roles in intracellular signaling of the transforming growth factor-beta (TGF-beta) superfamily. E1A, an adenoviral oncoprotein, is known to inhibit TGF-beta-induced transactivation through binding to Smad proteins. Recently, an EID-1 (E1A-like inhibitor of differentiation-1) and EID-2 (EID-1-like inhibitor of differentiation-2) were identified. In this study, we examined the effect of EID-2 on Smad-mediated TGF-beta signaling. Here, we show that EID-2 inhibits TGF-beta/Smad transcriptional responses. EID-2 interacts constitutively with Smad proteins, and most strongly with Smad3. Stable expression of EID-2 in the TGF-beta1-responsive cell line inhibits endogenous Smad3-Smad4 complex formation and TGF-beta1-induced expression of p21 and p15. These results suggest that EID-2 may function as an endogenous suppressor of TGF-beta signaling.