We assessed the roles of Smad7 in skin inflammation and wound healing using genetic and pharmacological approaches. In K5.TGF beta 1/K5.Smad7 bigenic (double transgenic) mice, Smad7 transgene expression reversed transforming growth factor (TGF)-beta 1 transgene-induced inflammation, fibrosis, and subsequent epidermal hyperplasia and molecularly abolished TGF-beta and NF-kappa B activation. Next, we produced recombinant human Smad7 protein with a Tat-tag (Tat-Smad7) that rapidly enters cells. Subcutaneous injection of Tat-Smad7 attenuated infiltration of F4/80(+) and CD11b(+) leukocytes and alpha-smooth muscle actin(+) fibroblasts before attenuating epidermal hyperplasia in K5.TGF beta 1 skin. Furthermore, topically applied Tat-Smad7 on K5.TGF beta 1 skin wounds accelerated wound closure, with improved re-epithelialization and reductions in inflammation and fibrotic response. A short treatment with Tat-Smad7 was also sufficient to reduce TGF-beta and NF-kappa B signaling in K5.TGF beta 1 skin and wounds. Relevant to the clinic, we found that human diabetic wounds had elevated TGF-beta and NF-kappa B signaling compared with normal skin. To assess the oncogenic risk of a potential Smad7-based therapy, we exposed K5. Smad7 skin to chemical carcinogenesis and found reduced myeloid leukocyte infiltration in tumors but not accelerated carcinogenesis compared with wild-type littermates. Our study suggests the feasibility of using exogenous Smad7 below an oncogenic level to alleviate skin inflammation and wound healing defects associated with excessive activation of TGF-beta and NF-kappa B.