Smads proteins play a key role in the intracellular signaling of the transforming growth factor (TGF)-? family of growth factors, which exhibits a diverse set of cellular responses, including cell proliferation and differentiation. In particular, Smad7 acts as an antagonist of TGF-? signaling, which could determine the intensity or duration of its signaling cascade. In this study we identified a protein inhibitor of activated STAT (signal transducers and activators of transcription), PIASy, as a novel interaction partner of Smad7 by yeast two-hybrid screening using the MH2 domain of Smad7 as bait. The association of Smad7 and PIASy was confirmed using co-expressed tagged proteins in 293T cells. Moreover, we found that other Smads including Smad3 also associated with PIASy through its MH2 domain, and PIASy suppressed TGF-?-mediated activation of Smad3. PIASy also stimulated the sumoylation of Smad3 in vivo. Furthermore, endogenous PIASy expression was induced by TGF-? in Hep3B cells. These findings provide the first evidence that a PIAS family protein, PIASy, associates with Smads and involves the regulation of TGF-? signaling using the negative feedback loop.