Hepatitis B, one of the most common infectious diseases in the world, is closely associated with acute and chronic hepatitis, cirrhosis, and hepatocellular carcinoma. Many clinical investigations have revealed that hepatic fibrosis is an important component of these liver diseases caused by chronic hepatitis B. TGF-beta signaling plays an important role in the pathogenesis of fibrosis in chronic hepatitis and cirrhosis. As these diseases are associated with hepatitis B virus (HBV) infection, we examined the possibility that the HBV-encoded pX oncoprotein regulates TGF-beta signaling. We show that pX enhances transcriptional activity in response to TGF-beta, BMP-2, and activin by stabilizing the complex of Smad4 with components of the basic transcriptional machinery. Additionally, confocal microscopic studies suggest that pX facilitates and potentiates the nuclear translocation of Smads, further enhancing TGF-beta signaling. Our studies suggest a new paradigm for amplification of Smad-mediated signaling by an oncoprotein and suggest that enhanced Smad-mediated signaling may contribute to HBV-associated liver fibrosis.