Smad proteins are intracellular mediators of transforming growth factor β (TGF-β) and related cytokines and undergo ligand-induced nuclear translocation. Here we describe the identification of a nuclear localization signal (NLS) in the N-terminal region of Smad 3, the major Smad protein involved in TGF-β signaling. An NLS-like basic motif (Lys40-Lys-Leu-Lys-Lys44), conserved among all pathway-specific Smad proteins, not only is responsible for constitutive nuclear localization of the isolated Smad 3 MH1 domain but also is crucial for Smad 3 nuclear import in response to ligand. Mutations in this motif completely abolished TGF-β-induced nuclear translocation but had no impact on ligand-induced phosphorylation of Smad 3, complex formation with Smad 4, or specific binding to DNA. Hence Smad 3 proteins with NLS mutations are dominant–negative inhibitors of TGF-β-induced transcriptional activation. Smad 4, which cannot translocate into the nucleus in the absence of Smad 3 or another pathway-specific Smad, contains a Glu in place of the last Lys in this motif. Smad 3 harboring the same mutation (K44E) does not undergo ligand-induced nuclear import. Conversely, the isolated Smad 4 MH1 domain does not accumulate in the nucleus but becomes nuclear enriched when Glu49 is replaced with Lys. We propose that this highly conserved five-residue NLS motif determines ligand-induced nuclear translocation of all pathway-specific Smads.