The transcription factor Sp1 has been implicated in cell-type-specific activation of transforming growth factor-β (TGFβ) target genes in normal epithelial cells as well as in aberrant gene activation by TGFβ in epithelial tumor cells. Here, we have examined the interaction of Sp1 with components of the Smad signaling cascade and its role in TGFβ-induced early gene expression in pancreatic cancer cells. Gene expression profiling was carried out in mithramycin-A-treated cells to identify Sp1-regulated TGFβ early response genes. We found that in pancreatic cancer cells Smad proteins and Sp1 cooperatively regulate expression of a distinct set of TGFβ target genes potentially involved in tumor progression, including MMP-11, cyclin D1 and Smad7. Mechanistically, TGFβ rapidly induces nuclear translocation of Smad proteins and subsequently stimulates Smad–Sp1 complex formation. Using the Smad7 promoter as a model for Smad-/Sp1-induced early gene activation, we demonstrated that this interaction increases Sp1 binding to GC-rich promoter boxes and results in superinduction of Sp1-mediated transcription. Moreover, inhibition of Sp1–DNA binding or transfection of Sp1-specific siRNA prevents TGFβ-induced Smad7 expression and consequently enhances Smad signaling in pancreatic cancer cells, as indicated by increased receptor-mediated phosphorylation of Smad3. We thus conclude that Sp1 strongly contributes to the aberrant transcriptional response of transformed epithelial cells to TGFβ stimulation.