The present invention discloses a novel TGF-β signaling mechanism implicated in craniofacial malformation as well as methods and compositions for treating craniofacial malformation utilizing knowledge of the mechanism. Methods of the invention generally comprises administering an effective amount of a TGF-β inhibitor to a subject in need of the treatment. Also disclosed are methods for treating craniofacial malformation by administering Tgf-β, Tgf-βRIII, p38 MAPK inhibitor or neutralizing antibodies to a subject. Also disclosed is a diagnostic method for diagnosing patients at risk of developing craniofacial malformation by determining the level of Tgf-β2 and ectopic p38 MAPK activation. Compounds useful for treating craniofacial malformation may also be discovered by using animal models of the present invention.