Smad proteins transduce signals from transforming growth factor‐β (TGF‐β) receptors and regulate transcription of target genes. TGF‐β is implicated in the regulation of the smooth muscle cell specific gene SM22α, but little is known about how Smads are involved in SM22α gene transcription. In this report, we demonstrate that TGF‐β activation of the SM22α promoter is Smad dependent in C3H10T1/2 cells, BALB 3T3 cells and neural crest Monc‐1 cells. We find that the promoter region from –162 to +41 is sufficient to up‐regulate the reporter gene upon TGF‐β induction. Smad3, Smad1 and Smad4 are found in TGF‐β inducible complexes that bind to a region containing a Smad binding site (SBS) and a medea box. Both the SBS and medea box are necessary for complex formation and are functionally important. Smad4 is limiting for TGF‐β induction, and Smad3, but not Smad1, significantly contributes to maximal activation. Time course luciferase assays and time course gel mobility shift assays reveal that the Smad3/4 complex is largely responsible for the immediate response of the SM22α promoter to TGF‐β induction, and also contributes to the maximal promoter activity. We further demonstrate that AP‐1 elements contribute to induction of the SM22α promoter by TGF‐β.