Transforming growth factor-β (TGF-β) is a pleiotropic cytokine implicated as a pathogenic mediator in various liver diseases. Enhanced TGF-β production and lack of TGF-β responses are often observed during hepatitis C virus (HCV) infection. In this study, we demonstrate that TGF-β-mediated transactivation is decreased in cells exogenously expressing the intact HCV polyprotein. Among 10 viral products of HCV, only core and nonstructural protein 3 (NS3) physically interact with the MH1 (Mad homology 1) region of the Smad3 and block TGF-β/Smad3-mediated transcriptional activation through interference with the DNA-binding ability of Smad3, not the nuclear translocation. However, the interactive domain of NS3 extends to the MH2 (Mad homology 2) region of Smad3 and a distinction is found between effects mediated, respectively, by these two viral proteins. HCV core, in the presence or absence of TGF-β, has a stronger suppressive effect on the DNA-binding and transactivation ability of Smad3 than NS3. Although HCV core, NS3, and the HCV subgenomic replicon all attenuate TGF-β/Smad3-mediated apoptosis, only HCV core represses TGF-β-induced G1 phase arrest through downregulation of the TGF-β-induced p21 promoter activation. Along with this, HCV core, rather than NS3, exhibits a significant inhibitory effect on the binding of Smad3/Sp1 complex to the proximal p21 promoter in response to TGF-β. In conclusion, HCV viral proteins interact with the TGF-β signaling mediator Smad3 and differentially impair TGF-β/Smad3-mediated transactivation and growth inhibition. This functional counteraction of TGF-β responses provides insights into possible mechanisms, whereby the HCV oncogenic proteins antagonize the host defenses during hepatocarcinogenesis.