The concept of genetic susceptibility factors predisposing cigarette smokers to develop emphysema stems from the clinical observation that only a fraction of smokers develop clinically significant chronic obstructive pulmonary disease. We investigated whether Smad3 knockout mice, which develop spontaneous air space enlargement after birth because of a defect in transforming growth factor-β (TGF-β) signaling, develop enhanced alveolar cell apoptosis and air space enlargement following cigarette smoke exposure. We investigated Smad3^−/− and Smad3^+/+ mice at different adult ages and determined air space enlargement, alveolar cell proliferation, and apoptosis. Furthermore, laser-capture microdissection and real-time PCR were used to measure compartment-specific gene expression. We then compared the effects of cigarette smoke exposure on Smad3^−/− and littermate controls. Smad3 knockout resulted in the development of air space enlargement in the adult mouse and was associated with decreased alveolar VEGF levels and activity and increased alveolar cell apoptosis. Cigarette smoke exposure aggravated air space enlargement and alveolar cell apoptosis. We also found increased Smad2 protein expression and phosphorylation, which was enhanced following cigarette smoke exposure, in Smad3-knockout animals. Double immunofluorescence analysis revealed that endothelial apoptosis started before epithelial apoptosis. Our data indicate that balanced TGF-β signaling is not only important for regulation of extracellular matrix turnover, but also for alveolar cell homeostasis. Impaired signaling via the Smad3 pathway results in alveolar cell apoptosis and alveolar destruction, likely via increased Smad2 and reduced VEGF expression and might represent a predisposition for accelerated development of emphysema due to cigarette smoke exposure.