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Transforming growth factor-β (TGF-β)/Smad3 signaling has been shown to play important roles in fibrotic and inflammatory diseases. However, the role of Smad3 in dyslipidemia and non-alcoholic fatty liver disease (NAFLD) in type 2 diabetes remains unclear, and whether targeting Smad3 has a therapeutic effect on these metabolic abnormalities remains unexplored. These topics were investigated in this study in Smad3 knockout (KO)-<i>db/db</i> mice and by treating <i>db/db</i> mice with a Smad3-specific inhibitor SIS3. Compared to Smad3 wild-type (WT)-<i>db/db</i> mice, Smad3 KO-<i>db/db</i> mice were protected against dyslipidemia and NAFLD. Similarly, treatment of <i>db/db</i> mice with SIS3 at week 4 before the onset of type 2 diabetes until week 12 was capable of lowering blood glucose levels and improving diabetic dyslipidemia and NAFLD. In addition, using RNA-sequencing, the potential Smad3-target genes related to lipid metabolism was identified in the liver tissues of Smad3 KO/WT mice, and the regulatory mechanisms were investigated. Mechanistically, we uncovered that Smad3 targeted peroxisome proliferator-activated receptor delta (PPARδ) to induce dyslipidemia and NAFLD in <i>db/db</i> mice, which was improved by genetically deleting and pharmacologically inhibiting Smad3.