Aneurysm-osteoarthritis syndrome characterized by unpredictable aortic aneurysm formation, is caused by SMAD3 mutations. SMAD3 is part of the SMAD2/3/4 transcription factor, essential for TGF-β-activated transcription. Although TGF-β-related gene mutations result in aneurysms, the underlying mechanism is unknown. Here, we examined aneurysm formation and progression in Smad3−/− animals. Smad3−/− animals developed aortic aneurysms rapidly, resulting in premature death. Aortic wall immunohistochemistry showed no increase in extracellular matrix and collagen accumulation, nor loss of vascular smooth muscle cells (VSMCs) but instead revealed medial elastin disruption and adventitial inflammation. Remarkably, matrix metalloproteases (MMPs) were not activated in VSMCs, but rather specifically in inflammatory areas. Although Smad3−/− aortas showed increased nuclear pSmad2 and pErk, indicating TGF-β receptor activation, downstream TGF-β-activated target genes were not upregulated. Increased pSmad2 and pErk staining in pre-aneurysmal Smad3−/− aortas implied that aortic damage and TGF-β receptor-activated signaling precede aortic inflammation. Finally, impaired downstream TGF-β activated transcription resulted in increased Smad3−/− VSMC proliferation. Smad3 deficiency leads to imbalanced activation of downstream genes, no activation of MMPs in VSMCs, and immune responses resulting in rapid aortic wall dilatation and rupture. Our findings uncover new possibilities for treatment of SMAD3 patients; instead of targeting TGF-β signaling, immune suppression may be more beneficial.