Members of the transforming growth factor beta (TGF-beta) superfamily of signaling molecules are involved in the regulation of many developmental processes that involve the interaction between mesenchymal and epithelial tissues. Smad7 is a potent inhibitor of many members of the TGF-beta family, notably TGF-beta and activin. In this study, we show that embryonic overexpression of Smad7 in stratified epithelia using a keratin 5 promoter, results in severe morphogenetic defects in skin and teeth and leads to embryonic and perinatal lethality. To further analyze the functions of Smad7 in epithelial tissues of adult mice, we used an expression system that allowed a controlled overexpression of Smad7 in terms of both space and time. Skin defects in adult mice overexpressing Smad7 were characterized by hyper-proliferation and missing expression of early markers of keratinocyte differentiation. Upon Smad7-mediated blockade of TGF-beta superfamily signaling, ameloblasts failed to produce an enamel layer in incisor teeth. In addition, TGF-beta blockade in adult mice altered the pattern of thymic T cell differentiation and the number of thymic T cells was significantly reduced. This study shows that TGF-beta superfamily signaling is essential for development of hair, tooth and T-cells as well as differentiation and proliferation control in adult tissues.