It is well accepted that TGF-β signaling has critical functional roles in lung development, injury, and repair. We showed previously that null mutation of Smad3, a critical node in the TGF-β pathway, protects mice against fibrosis induced by bleomycin. However, more recently we noticed that abnormal alveolarization also occurs in Smad3-deficient mice and that this is followed by progressive emphysema-like alveolar wall destruction mediated by MMP9. We now know that Smad3 cooperates with c-Jun to synergistically regulate a protein deacetylase SIRT1, by binding to an AP-1 site in the SIRT1 promoter. Consistently, Smad3 knockout lung at postnatal day 28 had reduced SIRT1 expression, which in turn resulted in increased histone acetylation at the binding sites of the transcription factors AP-1, NF-κB, and Pea3 on the MMP9 promoter, as well as increased acetylation of NF-κB. Thus, upon TGF-β activation, phosphorylated Smad3 can be translocated into the nucleus with Smad4, whereat Smad3 in turn collaborates with c-Jun to activate SIRT1 transcription. SIRT1 can deacetylate NF-κB at lysine 30, as well as histones adjacent to the transcription factor AP-1, NF-κB, and Pea3 binding sites of the MMP9 promoter, thereby suppressing MMP9 transcription, hence fixing MMP9 in the OFF mode. Conversely, when Smad3 is missing, this regulatory pathway is inactivated so that MMP9 is epigenetically turned ON. We postulate that these developmental epigenetic mechanisms by which Smad3 regulates MMP9 transcription cell autonomously may be important in modulating both emphysema and pulmonary fibrosis and that this could explain why both pathologies can appear within the same lung specimen.