Loss-of-function mutations in SMAD3 cause Loeys-Dietz syndrome type 3 (LDS3), a rare autosomal-dominant connective tissue disorder characterized by vascular pathology and skeletal abnormalities. Dysregulation of TGF-β/SMAD signaling is associated with abnormal skeletal features and bone fragility. To date, histomorphometric and ultrastructural characteristics of bone with SMAD3 mutations have not been reported in humans and the exact mechanism by which SMAD3 mutations cause the LDS3 phenotype is poorly understood. Here, we investigated bone histomorphometry and matrix mineralization in human bone with a SMAD3 mutation and explored the associated cellular defect in the TGF-β/SMAD pathway in vitro. The index patient had recurrent fractures, mild facial dysmorphism, arachnodactyly, pectus excavatum, chest asymmetry and kyphoscoliosis. Bone histomorphometry revealed markedly reduced cortical thickness (−68 %), trabecular thickness (−32 %), bone formation rate (−50 %) and delayed mineralization. Quantitative backscattered electron imaging demonstrated undermineralized bone matrix with increased heterogeneity in mineralization. The patient's SMAD3 mutation (c.200 T > G; p.I67S), when expressed from plasmid vectors in HEK293 cells, showed reduced phosphorylation and transcription factor activity compared to normal control and SMAD3 (p.S264Y), a gain-of-function mutation, somatic mosaicism of which causes melorheostosis. Transfection study of the patients' SMAD3 (p.I67S) mutation displayed lower luciferase reporter activity than normal SMAD3 and reduced expression of TGF-β signaling target genes. Patient fibroblasts also demonstrated impaired SMAD3 protein stability. Osteoclastogenic differentiation significantly increased and osteoclast-associated genes, including ACP5 (encoding TRAP), ATP6V0D2, and DCSTAMP, were up-regulated in CD14 (+) peripheral blood mononuclear cells (PBMCs) with the SMAD3 (p.I67S) mutation. Upregulation of osteoclastogenic genes was associated with decreased expression of TGF-β signaling target genes. We conclude that bone with the SMAD3 (p.I67S) mutation features reduced bone formation, and our functional studies revealed decreased SMAD3 activation and protein stability as well as increased osteoclastogenesis. These findings enhance our understanding of the pathophysiology of LDS3 caused by SMAD3 mutations. Emerging therapies targeting in the TGF-β/SMAD pathway also raise hope for treatment of LDS3.