The transforming growth factor-β (TGF-β) family of ligands elicit their biological effects by initiating new programs of gene expression. The best understood signal transducers for these ligands are the SMADs, which essentially act as transcription factors that are activated in the cytoplasm and then accumulate in the nucleus in response to ligand induction where they bind to enhancer/promoter sequences in the regulatory regions of target genes to either activate or repress transcription. This review focuses on the mechanisms whereby the SMADs achieve this and the functional implications. The SMAD complexes have weak affinity for DNA and limited specificity and, thus, they cooperate with other site-specific transcription factors that act either to actively recruit the SMAD complexes or to stabilize their DNA binding. In some situations, these cooperating transcription factors function to integrate the signals from TGF-β family ligands with environmental cues or with information about cell lineage. Activated SMAD complexes regulate transcription via remodeling of the chromatin template. Consistent with this, they recruit a variety of coactivators and corepressors to the chromatin, which either directly or indirectly modify histones and/or modulate chromatin structure.