Background. Ketonuria is common in diabetes. The major form of ketone body is beta-hydroxybutyrate (beta-HB), which is metabolized by the proximal tubule. Transforming growth factor beta (TGF-beta) and tubulopathy are important in diabetic nephropathy. Thus, the role of TGF-beta and the downstream Smad3 in beta-HB-induced effects in the human proximal tubule (HK-2 cell) was studied. Methods. Effects of beta-HB (0.1 to 10 mmol/L) on HK-2 cells were determined for: proliferation, cell cycle distribution, collagen production, tubular transdifferentiation [expression of alpha-smooth muscle actin (alpha-SMA) protein], TGF-beta, Smad2/3, p21(WAF1), and p27(kip1). Results. beta-HB (0.1 to 10 mmol/L) dose dependently decreased proliferation, arrested the cells in G(0)/G(1) phase of the cell cycle, and increased p21(WAF1)/p27(kip1) protein expression at 48 hours (without affecting p21(WAF1)/p27(kip1) mRNA and transcription). beta-HB (1 mmol/L) increased p21(WAF1)/p27(kip1) protein half-lives. beta-HB (1 mmol/L) increased TGF-beta transcription at 24 hours and TGF-beta1 mRNA/bioactivity at 48 hours. beta-HB (1 mmol/L) increased nuclear Smad2/3 protein expression and increased collagen production (without affecting tubular transdifferentiation), which were reversed by Smad7, dominant-negative Smad3, and N-acetylcysteine. Dominant-negative Smad3 reversed beta-HB-induced TGF-beta transcription at 24 hours, and reversed TGF-beta1 bioactivity at 48 hours. Dominant-negative Smad3 reversed beta-HB-induced p21(WAF1)/p27(kip1) protein expression at 48 hours. Finally, N-acetylcysteine, TGF-beta antibody, Smad7, and dominant-negative Smad3 reversed beta-HB (1 mmol/L)-induced growth inhibition at 48 hours. Conclusion. beta-HB activated Smad 2/3 by oxidative stress. TGF-beta and Smad3 mediate beta-HB-induced cell cycle-dependent growth inhibition while Smad3 mediate beta-HB-induced collagen production and p21(WAF1)/p27(kip1) protein expression in HK-2 cells. Moreover, beta-HB increased p21(WAF1)/p27(kip1) protein expression by increasing p21(WAF1)/p27(kip1) protein stability.