Activated pancreatic stellate cells (PSCs) play major roles in promoting pancreatic fibrosis. We previously reported that angiotensin II (Ang II) enhances activated PSC proliferation through EGF receptor transactivation. In the present study, we elucidated a novel intracellular mechanism by which Ang II stimulates cellular proliferation. TGF-beta1 inhibits activated PSC proliferation via a Smad3 and Smad4-dependent pathway in an autocrine manner. We demonstrated that Ang II inhibited TGF-beta1-induced nuclear accumulation of Smad3 and Smad4. Furthermore, Ang II rapidly induced inhibitory Smad7 mRNA expression. Adenovirus-mediated Smad7 overexpression inhibited TGF-beta1-induced nuclear accumulation of Smad3 and Smad4, and potentiated activated PSC proliferation. PKC inhibitor Go6983 blocked the induction of Smad7 mRNA expression by Ang II. In addition, 12-O-tetradecanoyl-phorbol 13-acetate, a PKC activator, increased Smad7 mRNA expression. These results suggest that Ang II enhances activated PSC proliferation by blocking autocrine TGF-beta1-mediated growth inhibition by inducing Smad7 expression via a PKC-dependent pathway.