Hyperactivation of transforming growth factor-β (TGF-β) signaling pathway is a common feature of hepatocellular carcinoma (HCC) progression. However, the driver factors leading to enhanced TGF-β activity are not well characterized. Here, we explore the mechanisms that loss of Krüppel-like factor 4 (KLF4) exacerbates oncogenic TGF-β signaling in human HCC. The expression of KLF4 and TGF-β signaling components in primary HCC and their clinicopathologic relevance and significance was evaluated by using tissue microarray and immunohistochemistry. Cellular and molecular impacts of altered KLF4 expression and TGF-β signaling were determined using immunofluorescence, western blot, reverse-transcriptase PCR, chromatin immunoprecipitation and promoter reporter assays. Loss of KLF4 expression in primary HCC closely correlated with decreased Smad7 expression, increased p-Smad2/3 expression and independently predicts reduced overall and relapse-free survival after surgery. TGF-β signaling components were expressed in most HCC cells, and activation of TGF-β signaling promoted cell migration and invasion. Enforced KLF4 expression blocked TGF-β signal transduction and inhibited cell migration and invasion via activation of Smad7 transcription, whereas deletion of its C-terminal zinc-finger domain diminished this effect. KLF4 protein physically interacts with the Smad7 promoter. Promoter deletion and point mutation analyses revealed that a region between nucleotides -15 bp and -9 bp of the Smad7 promoter was required for the induction of Smad7 promoter activity by KLF4. Our data indicate that KLF4 suppresses oncogenic TGF-β signaling by activation of Smad7 transcription, and that loss of KLF4 expression in primary HCC may contribute to activation of oncogenic TGF-β signaling and subsequent tumor progression.