Mice with targeted disruptions of the transforming growth factor-beta1 (TGF-beta1) gene or TGF-beta1 intracellular signalling pathways develop intestinal inflammation. Conversely, TGF-beta1-producing regulatory T cells protect against experimental colitis. Paradoxically, however, TGF-beta1 production is high in the gut of patients with chronic inflammatory intestinal disease, and yet inflammation proceeds unchecked. Here we discuss the functional role of Smad7, an intracellular inhibitor of TGF-beta1 signalling, in the control of gut inflammation by TGF-beta1. In particular, we delineate a scenario in which the high expression of Smad7 in inflammatory cells renders them unresponsive to TGF-beta1 and propose that control of Smad7, not TGF-beta1 production, is a key determinant in understanding how TGF-beta1 negatively regulates gut inflammation.