Accumulation of the amyloid- (A) peptide in the brain is a crucial factor in the development of Alzheimer disease. Expression of transforming growth factor-1 (TGF-1), an immunosuppressive cytokine, has been associated in vivo with A accumulation in transgenic mice and recently with A clearance by activated microglia, suggesting its deleterious and beneficial effects in neuronal cells. In this study, we demonstrated that TGF-1 stimulated the production of matrix metalloproteinase-2 (MMP-2) in a time-and dose-dependent manner in a human monocytic THP-1 cell line. Notably, we found that A1-42 consistently inhibited the TGF-1-induced production of MMP-2, the endogenous gene containing Smad response elements, whereas the reverse peptide, A42-1, evidenced little effect. Additionally, A1-42 reduced TGF-1-induced increase in plasminogen activator inhibitor-1 (PAI-1). This inhibitory effect of A1-42 was also seen in human astroglial T98G cell line. Furthermore, A1-42 significantly induced the expression of Smad7, which appears in turn to mediate the A suppression of the TGF-1-induced MMP-2 production. Indeed, Smad7 overexpression mimicked the inhibitory effect of A1-42 on TGF-1-induced MMP-2 production. Importantly, A1-42 markedly suppressed the transactivation of the transfected reporter construct, p3TP-Lux, which contains TGF-1-inducible Smad response elements. This was concomitant with a decreased MMP-2 production in TGF-1-treated cells. Inhibition of cellular Smad7 levels via the small interference RNA method significantly ameliorated the A1-42-mediated suppression of TGF-1-inducible transcription reporter activity, thereby restoring MMP-2 induction, whereas Smad7 transfection down-regulated TGF-1-inducible transcription reporter activity. Collectively, these data suggest that A1-42 may play an important role in the negative regulation of TGF-1-induced MMP-2 production via Smad7 expression.