Transforming growth factor (TGF)-beta1, once activated, binds to its receptors and mediates renal fibrosis via the downstream Smad signaling pathway. We reported here that mice overexpressing latent TGF-beta1 in keratinocytes were protected against renal fibrosis in a model of obstructive kidney disease. In normal mice, both transgenic (Tg) and wild-type (WT) mice had normal renal histology and function, despite a 10-fold increase in plasma latent TGF-beta1 in Tg mice. A severe renal fibrosis was developed in WT mice at 7 days after urinary obstruction. Unexpectedly, renal fibrosis was prevented in Tg mice, although levels of latent TGF-beta1 in both circulation and renal tissues remained high. Compared with the WT mice, quantitative real-time PCR showed that upregulation of renal alpha-smooth muscle actin (SMA), collagen I, and collagen III mRNA was inhibited in Tg mice (60-70% reduced, all P < 0.01). These were further confirmed by immunohistochemistry with a marked inhibition of tubulointerstitial accumulation of alpha-SMA+ fibroblasts, collagen I, and collagen III matrix in Tg mice (all P < 0.001). Further studies showed that inhibition of renal fibrosis in Tg mice was associated with a significant reduction in renal TGF-beta1 and CTGF (60% reduced, P < 0.05), an increase in renal Smad7, a suppression of TSP-1 (a critical factor for TGF-beta1 activation), and an inhibition of Smad2/3 activation (all P < 0.001). In conclusion, latent TGF-beta may play a protective role in renal fibrosis. Inhibition of renal TGF-beta1 expression and activation, thereby blocking the downstream TGF-beta signaling pathway, may be a critical mechanism by which latent TGF-beta1 protects against renal fibrosis.