T cell-intrinsic transforming growth factor β (TGFβ) receptor signaling plays an essential role in controlling immune responses. The RING-type E3 ligase Cbl-b has been shown to mediate the sensitivity of T cells to TGFβ; however, the mechanism underlying this process is unknown. This study shows that SMAD7, an established negative regulator of TGFβ receptor (TGFβR) signaling, is a key downstream effector target of Cbl-b. SMAD7 protein levels, but not SMAD7 mRNA levels, are upregulated in cblb(-/-) T cells. Cbl-b directly interacts with and ubiquitinates SMAD7, suggesting that Cbl-b posttranscriptionally regulates SMAD7. In support of this notion, concomitant genetic loss of SMAD7 in cblb(-/-) mice restored TGFβ sensitivity on T cell cytokine responses and abrogated the tumor rejection phenotype of cblb(-/-) mice. These results demonstrate an essential and non-redundant role for Cbl-b in controlling TGFβR signaling by directly targeting SMAD7 for degradation during T cell responses in vitro and in vivo.