Transforming growth factor-b (TGFb) is a key mediator of extracellular matrix (ECM) accumulation in sclerotic kidney diseases such as diabetic nephropathy. One of the main target cells for TGFb in the kidney are glomerular mesangial cells, which respond by increasing expression of ECM proteins, such as collagens, laminin and fibronectin, while suppressing the expression of ECM-degrading proteases and increasing the synthesis of ECM protease inhibitors, including plasminogen activator inhibitor-1. Previous studies have shown that exposure of mesangial cells to chronic high-glucose conditions, such as those seen in diabetes, increases ECM deposition in a mechanism involving glucose-mediated up-regulation of TGFb expression. Naturally occurring inhibitors of this TGFb-dependent fibrotic response include decorin, a small leucine-rich proteoglycan. While the mechanism by which TGFb stimulates gene expression via the Smad signal-transduction pathway is becoming clear, the precise mechanism by which decorin may impinge upon TGFb activity remains to be established. In this study, for the first time we provide evidence that decorin can disrupt glucose- and TGFb/Smad-dependent transcriptional events in human mesangial cells through a mechanism that involves an increase in Ca2+ signalling, the activation of Ca2+/calmodulin-dependent protein kinase II and ensuing phosphorylation of Smad2 at Ser-240. We show that decorin also induces Ser-240 phospho-Smad hetero-oligomerization with Smad4 and the nuclear localization of this complex independently of TGFb receptor activation. Thus, in human mesangial cells, the mechanism of decorin-mediated inhibition of TGFb signalling may involve activation of Ca2+ signalling, the subsequent phosphorylation of Smad2 at a key regulatory site, and the sequestration of Smad4 in the nucleus.