Transforming growth factor-beta (TGF-beta) elicits a potent growth inhibitory effect on many normal cells by binding to specific serine/threonine kinase receptors and activating specific Smad proteins, which regulate the expression of cell cycle genes, including the p21 cyclin-dependent kinase (CDK) inhibitor gene. Interestingly, cancer cells are often insensitive to the anti-mitogenic effects of TGF-beta for which the molecular mechanisms are not well understood. In this study, we found that the candidate prostate cancer susceptibility gene ELAC2 potentiates TGF-beta/Smad-induced transcriptional responses. ELAC2 associates with activated Smad2; the C-terminal MH2 domain of Smad2 interacts with the N-terminal region of ELAC2. Small interfering siRNA-mediated knock-down of ELAC2 in prostate cells suppressed TGF-beta-induced growth arrest. Moreover, ELAC2 was shown to specifically associate with the nuclear Smad2 partner, FAST-1 and to potentiate the interaction of activated Smad2 with transcription factor Sp1. Furthermore, activation of the p21 CDK inhibitor promoter by TGF-beta is potentiated by ELAC2. Taken together our data indicate an important transcriptional scaffold function for ELAC2 in TGF-beta/Smad signaling mediated growth arrest.