The DNA damage response helps to maintain genome integrity, suppress tumorigenesis, and mediate the effects of radiotherapy and chemotherapy. Our previous studies have shown that Smad1 is upregulated and activated by Atm in DNA damage response, which can further bind to p53 and promote p53 stabilization. Here we report another aspect of the interplay between p53 and Smad1. Comparison of rectal tumor against paired paraneoplastic specimens and analysis of >500 colorectal tumors revealed that Smad1 was upregulated in tumor samples, which was attributable to p53 defects. Using MEFs as a model, we found that knockdown of the elevated Smad1 in p53−/− MEFs promoted cell proliferation, E1A/Ras-induced cell transformation, and tumorigenesis. Mechanistic studies suggest that elevated Smad1 and momentary activation inhibit cell proliferation by upregulating p57Kip2 and enhancing Atm–Chk2 activation. Surprisingly, elevated Smad1 appears to have a negative effect on chemotherapy, as colorectal tumors, primary cancer cells, and cell lines with Smad1 knockdown all showed an increase in chemosensitivity, which could be attributable to elevated p57Kip2. These findings underscore the significance of Smad1–p53 interaction in tumor suppression and reveal an unexpected role for Smad1 in chemoresistance of colorectal cancers.