Intracellular Smad proteins mediate signal transduction of the transforming growth factor-β (TGF-β) superfamily that play pleiotropic roles in hematopoietic development, suggesting that intracellular Smad proteins may play key roles in hematopoietic regulation. Although inhibitory Smad7, which negatively regulates TGF-β signaling, has been implicated in the development of mature hematopoietic cells, a role for Smad7 in regulating more primitive hematopoietic cells has yet to be examined. Here, Smad7 was overexpressed in primary human severe combined immunodeficient (SCID) repopulating cells (SRCs), representing a common myeloid/lymphoid precursor cell with the functional capacity to repopulate the bone marrow of nonobese diabetic (NOD)/SCID recipient mice. Retroviral transduction of Smad7 into human umbilical cord blood (CB)-SRCs caused a shift from lymphoid dominant engraftment toward increased myeloid contribution, and increased the myeloid-committed clonogenic progenitor frequency in reconstituted mice. Neither myeloid nor B-lymphoid lineage developmental stages were compromised by Smad7 overexpression, suggesting Smad7 regulates cell fate commitment decisions of myeloid/lymphoid precursors by augmenting myeloid differentiation at the expense of lymphoid commitment. In addition, global gene expression analysis using microarray was used to identify potential target genes regulated by Smad7 in primitive hematopoietic cells that may control this process. Our study demonstrates a novel and unexpected role for Smad7 in modulating the cell fate decisions of primary multipotent human repopulating cells and establishes a role for Smad7 in the development of primitive human hematopoietic cells.