In advanced stages of cancers, TGF-β promotes tumor progression in conjunction with inputs from receptor tyrosine kinase pathways. However, mechanisms that underpin the signaling cooperation and convert TGF-β from a potent growth inhibitor to a tumor promoter are not fully understood. We report here that TGF-β directly regulates alternative splicing of cancer stem cell marker CD44 through a phosphorylated T179 of SMAD3-mediated interaction with RNA-binding protein PCBP1. We show that TGF-β and EGF respectively induce SMAD3 and PCBP1 to colocalize in SC35-positive nuclear speckles, and the two proteins interact in the variable exon region of CD44 pre-mRNA to inhibit spliceosome assembly in favor of expressing the mesenchymal isoform CD44s over the epithelial isoform CD44E. We further show that the SMAD3-mediated alternative splicing is essential to the tumor-promoting role of TGF-β and has a global influence on protein products of genes instrumental to epithelial-to-mesenchymal transition and metastasis.