Activated monocytes produce proinflammatory cytokines (monokines) such as interleukin (IL)-12, IL-15, and IL-18 for induction of interferon-gamma (IFN-gamma) by natural killer (NK) cells. NK cells provide the antiinflammatory cytokine transforming growth factor (TGF)-beta, an autocrine/negative regulator of IFN-gamma. The ability of one signaling pathway to prevail over the other is likely important in controlling IFN-gamma for the purposes of infection and autoimmunity, but the molecular mechanism(s) of how this counterregulation occurs is unknown. Here we show that in isolated human NK cells, proinflammatory monokines antagonize antiinflammatory TGF-beta signaling by downregulating the expression of the TGF-beta type II receptor, and its signaling intermediates SMAD2 and SMAD3. In contrast, TGF-beta utilizes SMAD2, SMAD3, and SMAD4 to suppress IFN-gamma and T-BET, a positive regulator of IFN-gamma. Indeed, activated NK cells from Smad3(-/-) mice produce more IFN-gamma in vivo than NK cells from wild-type mice. Collectively, our data suggest that pro- and antiinflammatory cytokine signaling reciprocally antagonize each other in an effort to prevail in the regulation of NK cell IFN-gamma production.