In C. elegans, a TGFbeta-related signaling pathway regulates body size. Loss of function of the signaling ligand (dbl-1), receptors (daf-4 and sma-6) or Smads (sma-2, sma-3 and sma-4) results in viable, but smaller animals because of a reduction in postembryonic growth. We have investigated the tissue specificity of this pathway in body size regulation. We show that different tissues are reduced in size by different proportions, with hypodermal blast cell size most closely proportional to body size. We show that SMA-3 Smad is expressed in pharynx, intestine and hypodermis, as has been previously reported for the type I receptor SMA-6. Furthermore, we find that SMA-3::GFP is nuclear localized in all of these tissues, and that nuclear localization is enhanced by SMA-6 activity. Interestingly, SMA-3 protein accumulation was found to be negatively regulated by the level of Sma/Mab pathway activity. Using genetic mosaic analysis and directed expression of SMA-3, we find that SMA-3 activity in the hypodermis is necessary and sufficient for normal body size. As dbl-1 is expressed primarily in the nervous system, these results suggest a model in which postembryonic growth of hypodermal cells is regulated by TGFbeta-related signaling from the nervous system to the hypodermis.