Many patients with chronic hepatitis caused by hepatitis C virus (HCV) infection develop liver fibrosis with high risk for hepatocellular carcinoma (HCC), but the mechanism underling this process is unclear. Conversely, transforming growth factor beta (TGF-) activates not only TGF- type I receptor (TRI) but also c-Jun N-terminal kinase (JNK), which convert the mediator Smad3 into two distinctive phosphoisoforms: C-terminally phosphorylated Smad3 (pSmad3C) and linker-phosphorylated Smad3 (pSmad3L). Whereas the TRI/pSmad3C pathway suppresses epithelial cell growth by upregulating p21 WAF1 transcription, JNK/pSmad3L-mediated signaling promotes extracellular matrix deposition, partly, by upregulating plasminogen activator inhibitor 1 (PAI-1). We studied the domain-specific Smad3 phosphorylation in biopsy specimens representing chronic hepatitis, cirrhosis, or HCC from 100 patients chronically infected with HCV, and correlated Smad3 phosphorylation with clinical course. As HCV-infected livers progressed from chronic hepatitis through cirrhosis to HCC, hepatocytic pSmad3L/PAI-1 increased with fibrotic stage and necroinflammatory grade, and pSmad3C/p21 WAF1 decreased.