TGF-beta can be a potent suppressor of lymphocyte effector cell functions and can mediate these effects via distinct molecular pathways. The role of TGF-beta in regulating CD16-mediated NK cell IFN-gamma production and antibody-dependent cellular cytotoxicity (ADCC) is unclear, as are the signaling pathways that may be utilized. Treatment of primary human NK cells with TGF-beta inhibited IFN-gamma production induced by CD16 activation with or without IL-12 or IL-2, and it did so without affecting the phosphorylation/activation of MAP kinases ERK and p38, as well as STAT4. TGF-beta treatment induced SMAD3 phosphorylation, and ectopic overexpression of SMAD3 resulted in a significant decrease in IFN-gamma gene expression following CD16 activation with or without IL-12 or IL-2. Likewise, NK cells obtained from smad3(-/-) mice produced more IFN-gamma in response to CD16 activation plus IL-12 when compared with NK cells obtained from wild-type mice. Coactivation of human NK cells via CD16 and IL-12 induced expression of T-BET, the positive regulator of IFN-gamma, and T-BET was suppressed by TGF-beta and by SMAD3 overexpression. An extended treatment of primary NK cells with TGF-beta was required to inhibit ADCC, and it did so by inhibiting granzyme A and granzyme B expression. This effect was accentuated in cells overexpressing SMAD3. Collectively, our results indicate that TGF-beta inhibits CD16-mediated human NK cell IFN-gamma production and ADCC, and these effects are mediated via SMAD3.