TIF1γ (Transcriptional Intermediary Factor 1 γ) has been implicated in Smad-dependent signaling by Transforming Growth Factor beta (TGF-β). Paradoxically, TIF1γ functions both as a transcriptional repressor or as an alternative transcription factor that promotes TGF-β signaling. Using ordinary differential-equation models, we have investigated the effect of TIF1γ on the dynamics of TGF-β signaling. An integrative model that includes the formation of transient TIF1γ-Smad2-Smad4 ternary complexes is the only one that can account for TGF-β signaling compatible with the different observations reported for TIF1γ. In addition, our model predicts that varying TIF1γ/Smad4 ratios play a critical role in the modulation of the transcriptional signal induced by TGF-β, especially for short stimulation times that mediate higher threshold responses. Chromatin immunoprecipitation analyses and quantification of the expression of TGF-β target genes as a function TIF1γ/Smad4 ratios fully validate this hypothesis. Our integrative model, which successfully unifies the seemingly opposite roles of TIF1γ, also reveals how changing TIF1γ/Smad4 ratios affect the cellular response to stimulation by TGF-β, accounting for a highly graded determination of cell fate.