Fibroblast proliferation, differentiation into myofibroblasts, and increased collagen synthesis are key events during both normal wound repair and fibrotic lesion formation. Here we report that these biological responses to TGF-beta by fibroblasts are regulated via a CTGF-dependent pathway in concert with either EGF or IGF-2. Our studies indicate these responses to TGF-beta are mutually exclusive, and cells that are proliferating do not express alpha-SMA or elevated levels of collagen synthesis. Cells expressing alpha-SMA do not exhibit DNA synthesis but do coexpress higher levels of types I and III collagen mRNA. Thus, fibroblast proliferation and differentiation are controlled by combinatorial signaling pathways involving not only components of the TGF-beta/CTGF pathway, but also signaling events induced by EGF and IGF-2-activated receptors. Collectively, our studies indicate TGF-beta functions as a classic embryonic inducer, initiating a cascade that is controlled by other factors in the cellular environment. We propose a model for this process with regard to wound repair and fibrotic lesion formation that is likely applicable to other instances of CTGF action during embryogenesis.