Transforming growth factor-beta (TGF-beta) signaling is critical in a variety of biological processes such as cell proliferation, differentiation, and apoptosis. TGF-beta signaling is mediated by a group of proteins including TGF-beta receptors and Smads. It is known that different cells can exhibit different sensitivities to TGF-beta. Several molecular mechanisms, such as the differential expression of the receptor levels, have been suggested as contributing to these differences. Here, we report evidence for a novel mechanism of regulating TGF-beta sensitivity that depends on the role of CHIP (carboxyl terminus of Hsc70-interacting protein) in regulating the basal level of Smad3 via the ubiquitin-dependent degradation pathway. First, using a luciferase assay we found that overexpression of CHIP inhibited TGF-beta signaling, whereas silencing CHIP expression by small interfering RNAs led to increased TGF-beta signaling sensitivity. Second, based on the results of cell proliferation assays and JunB expression, we found that TGF-beta signaling could be abolished by stably overexpressing CHIP. Third, in those cell lines with stably expressed CHIP, we observed that the Smad3 protein level was dramatically decreased. Finally, we demonstrated that CHIP served as a U-box dependent E3 ligase that can directly mediate ubiquitination and degradation of Smad3 and that this action of CHIP was independent of TGF-beta signaling. Taken together, these findings suggest that CHIP can modulate the sensitivity of the TGF-beta signaling by controlling the basal level of Smad3 through ubiquitin-mediated degradation.