Pax6 transcription is under the control of two main promoters (P0 and P1), and these are autoregulated by Pax6. Additionally, Pax6 expression is under the control of the TGFbeta superfamily, although the precise mechanisms of such regulation are not understood. The effect of TGFbeta on Pax6 expression was studied in the FHL124 lens epithelial cell line and was found to cause up to a 50% reduction in Pax6 mRNA levels within 24 h. Analysis of luciferase reporters showed that Pax6 autoregulation of the P1 promoter, and its induction of a synthetic promoter encoding six paired domain-binding sites, were significantly repressed by both an activated TGFbeta receptor and TGFbeta ligand stimulation. Subsequently, a novel Pax6 binding site in P1 was shown to be necessary for autoregulation, indicating a direct influence of Pax6 protein on P1. In transfected cells, and endogenously in FHL124 cells, Pax6 co-immunoprecipitated with Smad3 following TGFbeta receptor activation, while in GST pull-down experiments, the MH1 domain of Smad3 was observed binding the RED sub-domain of the Pax6 paired domain. Finally, in DNA adsorption assays, activated Smad3 inhibited Pax6 from binding the consensus paired domain recognition sequence. We hypothesize that the Pax6 autoregulatory loop is targeted for repression by the TGFbeta/Smad pathway, and conclude that this involves diminished paired domain DNA-binding function resulting from a ligand-dependant interaction between Pax6 and Smad3.