Tissue homeostasis in mammals relies on powerful cytostatic and differentiation signals delivered by the cytokine TGFbeta and relayed within the cell via the activation of Smad transcription factors. Formation of transcription regulatory complexes by the association of Smad4 with receptor-phosphorylated Smads 2 and 3 is a central event in the canonical TGFbeta pathway. Here we provide evidence for a branching of this pathway. The ubiquitious nuclear protein Transcriptional Intermediary Factor 1gamma (TIF1gamma) selectively binds receptor-phosphorylated Smad2/3 in competition with Smad4. Rapid and robust binding of TIF1gamma to Smad2/3 occurs in hematopoietic, mesenchymal, and epithelial cell types in response to TGFbeta. In human hematopoietic stem/progenitor cells, where TGFbeta inhibits proliferation and stimulates erythroid differentiation, TIF1gamma mediates the differentiation response while Smad4 mediates the antiproliferative response with Smad2/3 participating in both responses. Thus, Smad2/3-TIF1gamma and Smad2/3-Smad4 function as complementary effector arms in the control of hematopoietic cell fate by the TGFbeta/Smad pathway.