GADD45β regulates cell growth, differentiation, and cell death following cellular exposure to diverse stimuli, including DNA damage and transforming growth factor-β (TGFβ). We examined how cells transduce the TGFβ signal from the cell surface to the gadd45β genomic locus and describe how GADD45β contributes to TGFβ biology. Following an alignment of gadd45β genomic sequences from multiple organisms, we discovered a novel TGFβ-responsive enhancer encompassing the third intron of the gadd45β gene. Using three different experimental approaches, we found that SMAD3 and SMAD4, but not SMAD2, mediate transcription from this enhancer. Three lines of evidence support our conclusions. First, overexpression of SMAD3 and SMAD4 activated the transcriptional activity from this enhancer. Second, silencing of SMAD protein levels using short interfering RNAs revealed that TGFβ-induced activation of the endogenous gadd45β gene required SMAD3 and SMAD4 but not SMAD2. In contrast, we found that the regulation of plasminogen activator inhibitor type I depended upon all three SMAD proteins. Last, SMAD3 and SMAD4 reconstitution in SMAD-deficient cancer cells restored TGFβ induction of gadd45β. Finally, we assessed the function of GADD45β within the TGFβ response and found that GADD45β-deficient cells arrested in G2 following TGFβ treatment. These data support a role for SMAD3 and SMAD4 in activating gadd45β through its third intron to facilitate G2 progression following TGFβ treatment.