Transforming growth factor-beta (TGF-beta), a multifunctional cytokine, has been widely suggested to play a role in the pathogenesis of Alzheimer's disease. Supporting this, levels of TGF-beta are elevated in the cerebrospinal fluid, sera, and brain of patients with Alzheimer's disease. Since TGF-beta is neuroprotective, whereas Alzheimer's disease is typified by neurodegeneration, we speculated that defects in TGF-beta signaling might abrogate its neuroprotective properties. Consistently with an increase in TGF-beta in Alzheimer's disease, we found significant increases in phospho-Smad2, a major downstream signaling molecule of TGF-beta, in hippocampal neurons of Alzheimer's disease compared with age-matched control patients. However, in contrast to an expected nuclear localization, phosphorylated Smad2 in Alzheimer's disease was predominantly, and ectopically, found in the neuronal cytoplasm, specifically colocalized with neurofibrillary tangles and granulovacuolar degeneration. Given that a nuclear localization is required to regulate the transcription of TGF-beta target genes to afford neuroprotection, the ectopic localization of phosphorylated Smad2 suggests a defect in the Smad-mediated signaling pathway of TGF-beta in Alzheimer's disease and consequent loss of neuroprotective function.